185 & 186 restriction on closing blance/transaction wise

Co Act 2013 232 views 3 replies

Jyothis

Article

1127 Points Joined December 2014

Whether 185 & 186 is applicable for every transaction Or closing balance as on 31.03 How it count for compliance under 185 & 186.

Consider a case , where a Husband & Wife (Both are Directors of various 5 P.Ltd Hospital)

In every 5 Hosipital either Husband & wife Or along such 5 companies have related shares.

Every company transfers its fund to Other companies and such directors depending on its reqirement.

Hence body corporated are invested in company,there is no exemption on amount which can be given to Directors/Related companies u/s 185.

Companies normally closes(Settles) such loans/advance Accounts of related companies/Director.(Please note no interest is charged on such transactions.) on FY closing.

So is there any non compliance in giving interest loan.

Replies (3)

Pratik Shah

Practising Company Secretary

4432 Points Joined October 2014

Obviously, it is big non-compliance for a company who is giving loan to Directors or its related parties.

However, from 05th June, 2015, Section 185 is exempted to Private Limited Compaines if few conditions are fulfiled. Kindly refer the notification dated 05th June, 2015. Even though they settles their loan positions before year hand, it was clear non-compliance if private company has given loan to Director or its related parties before 05th June, 2015.

Jyothis

Article

1127 Points Joined December 2014

In our company Body coporates are invested.

So closing or settling transaction at evey end will ensure proper compliance or not.

(In cases where such loans are restricted under 185),Can company give loans & settling on year end will ensure proper compliance.

Pratik Shah

Practising Company Secretary

4432 Points Joined October 2014

If your case is not coming under exemption, and if such company has given loan to director/related parties, then it is pure non-compliance because Section 185 is restrictive section which is asking a company not to do something. Even, settling loan positions will not make it good. It will remain non-compliance.

However, if company has already given loans to directors/related parties (if not exempted), then it is better to repay such loans and ensure not to do it again. Else, Company will be in trouble, if caught.