Section 372

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Megha Shah (Querist)
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24 February 2010 1) Our company wants to provide Loan to a group Co (which is a broking company). The Group Co (broking company) has a stake in our company (between 35% - 40%). Can our company provide a loan and what are the restrictions.
2) Section 372A also says that the sub sec(s) (1) and (2) doesnt apply to any loan made by an holding company to its wholly owned subsidiary. But can a wholly owned subsidiary provide a loan to its holding co ???

Aditya Maheshwari

Aditya Maheshwari (Expert)
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24 February 2010 If your company which is giving loan is a private limited company then there no restrictions in giving loan.

If public limited company is givin loan to its non susidiary then loan can be given upto 60% of its reserves & surplus or 100% of its reserves whiehever is higher.

The loan can be given in excess of the limits provided a resolution is passed in an general meeting of the members sanctioning specific limits for givin loan

Aditya Maheshwari

Aditya Maheshwari (Expert)
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24 February 2010 Also if the company giving loan is a public limited company and loan is given to a private limited company then there are some restrictions in section 295 also i. e. the director of the lending company should not be either a director or shareholder of the borrowing company.

Megha Shah

Megha Shah (Querist)
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25 February 2010 Thanks Aditya.

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