Sec.185

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Mukesh jha (Querist)
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17 August 2014 whether loan given to subsidary has been removed completly from new act.if no,then what the provision is.

Ankur Garg

Ankur Garg (Expert)
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17 August 2014 Exemption/Relief provided by Rules w.r.t. Section 185 Loan to Directors read with Rule 10 of The Companies (Meetings of Board and Its Powers) Rules, 2014 (Chapter 12).

(1) Any loan made by a holding company to its wholly owned subsidiary company or any guarantee given or security provided by a holding company in respect of any loan made to its wholly owned subsidiary company is exempted from the requirements under this section; and

(2) Any guarantee given or security provided by a holding company in respect of loan made by any bank or financial institution to its subsidiary company is exempted from the requirements under this section:

Provided that such loans made under sub-rule (1) and (2) are utilised by the subsidiary company for its principle business activities.

As per my understanding direct loan, without complying section 185, from Holding to subsidiary is possible only when the borrower company is wholly owned subsidiary Company.

However a holding company can fund its subsidiary Company indirectly by providing guarantee or security in respect of loan made by any bank or financial institution to its subsidiary company.

Do you think it is a big relief for corporate world keeping in view the havoc created by section 185 initially?

Regards
CS Ankur Garg

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