loan to relatives

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

05 July 2010 Dear Sirs
What are the consequences , if a private limited company pays interest free advances of Rs 30 lacs to the relative of the director.

Pl. guide me

Regards

Ankur Garg

Ankur Garg (Expert)
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07 July 2010 In my opinion there are no adverse consequences if a company provide such loan. However this is a case of section 295 loan to director where prior CG approval is required.

But in your case it is fine as you are a private company and section 295 is not applicable to a pvt. company.

But such transaction must be supported by a board resolution and director must disclose his interest in the transaction u/s 299

Regards

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