section 295 aplplicable to group co. or not?

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Kavitha (Querist)
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04 February 2010 Hi if a co.is lending to its group co. is section 295 attracted i.e is it necessary to get the central govt's approval?
Can anybody provide me a checklist for section 372 A?

Ankur Garg

Ankur Garg (Expert)
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05 February 2010 Hi,

Kindly appreciate is one co. lending money to another co. than it is a case of inter corporate loan and section 372A is applicable and not section 295.

No need to go for CG approval. Read both the sections yourself.

Views of other experts solicited.

Regards

Kavitha

Kavitha (Querist)
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06 February 2010 what about section 295 e? is it applicable?

Rahul Gupta

Rahul Gupta (Expert)
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08 February 2010 Agreed with Mr. Ankur .
My Interpretation says that in simple Language sec 295 (e) says that >
Co. (Lending Co.) should obtain approval of CG before giving loan to any body corporate (Receiving Co.) in which the BOD, MD or Manager acts in accordance with the director of the lending co.
Here Lending co. is not giving loan to its group co. it is effected by the director of the Lending Co. So sec 295 is not applicable and CG approval is not required.

Some checklist points for Sec 372A >
- Loan should not exceed 60% of its Paid Capital and Reserves or 100% of reserves whichever is more.
- If the amount (including loans already given) exceeds the above limits then a special resolution needs to be passed in a general meeting.
- Also, if the limit exceeds or any default is made in repayment of loan taken from any public financial institution then prior approval of the said public financial institution is also required.
- Obtain the prior consent of all the directors present in the meeting.
- Interest rate should not be lower than the prevailing bank rate.
- No default U/Sec 58A should subsist.
- Register containing details of the loan given should be made and kept at registered office for inspection.

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