Loans to holding company

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avinash (Querist)
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21 January 2013 We have a Wholly owned foreign subsidiary. can we take loan from our foreign subsidiary if cant, is there any way to received fund from subsidiary.
please guide

vimal sharma

vimal sharma (Expert)
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03 May 2013 Refer section 372A read with section 295 of the Companies Act, 1956 which says

No company ("the lending company")without obtaining the previous approval of the Central Government in that behalf shall directly or indirectly, make any loan to:

(a) any director of the lending company or of a company which is its holding company or any partner or relative of any such director;

(b) any firm in which any such director or relative is a partner;

(c) any private company of which any such director is a director or member;

(d) any body corporate at a general meeting of which not less than twenty- five per cent. of the total voting power may be exercised or controlled by any such director, or by two or more such directors together; or

(e) any body corporate, the Board of directors, managing director, managing agent, secretaries and treasurers, or manager whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or directors, of the lending company.

When we read Section 372A, it seems that subsi co. can make loan up to 60% of its paid up capital + free reserve with Board's Approval but section 295 makes it complicated....

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