UNSECURED LOANS

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esha (Querist)
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31 August 2010 Dear Members

Can a Private Limited Company provide unsecured Loans to another Private Limited Company, if yes then what would be the consequences?
And what kind of compliances both pvt ltd co.s needs to comply in this regard.

Aditya Maheshwari

Aditya Maheshwari (Expert)
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31 August 2010 Yes it can give. Just check whether there is no cross holding so that section 2(22)(e) does not get attracted.

esha

esha (Querist)
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31 August 2010 Hello Sir
Thanx for ur quick reply but i still have some query as in a concerned Pvt. Company there are unsecured loans existing in the company which it have borrowed from other Pvt. company and its not contravening provisions of Section 2 (22)(e) also but can u refer me some article, circular section or anything that would add weightage to ur reply.

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Aditya Maheshwari

Aditya Maheshwari (Expert)
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31 August 2010 In case of any loan given by a company provisions of section 372A apply and section 295 apply. However since the company giving loan is a private limited company the said sections are not applicable and hence there is no restriction on granting loan.

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