Section 185 of the companies act

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CA Shraddha Vora (Querist)
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19 July 2018 As per Amendment in Section 185 of the Companies Act, 2013, a company can provide loan to person in whom director is interested subject to the condition that special resolution for the same is passed. In view of the aforesaid amendment we have the following queries:

1. Whether the shareholders’ approval required is “prior” i.e. before advancing of any loan or “post” i.e. after the grant of loan?

2. In case if the approval to be obtained is post i.e. after the grant of loan, whether the Company can take approval for all loans/guarantees/securities given during the year in the ensuing AGM? (For eg.- Can we obtain approval of shareholders in the AGM to be held in the year 2019 for all the loans/guarantees/ securities given by the Company during the period 7th May, 2018 to 31st March, 2019?)

CS Peer mehboob

CS Peer mehboob (Expert)
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20 July 2018 As per the amendment vide Companies(Amendment) Act, 2017 in Section 185, Company may provide loan to any person in which director is interested u/s185(2), subject to the condition that A special resolution is passed. As per the Section 185, it is a condition which is required to be fulfilled if you are giving loan to any person under section 185. This condition has to be prior approval, because only after meeting with this condition, company is allowed to give loan to any person as specified under Section 185(2).

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