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Advacne salary to director

Ashish Sharma (Service) (1028 Points)

02 December 2014

Please advise can we advance Salary to Director for Three Months. Is this count as loan to Director.

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P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad) (8229 Points)
Replied 03 December 2014

Sec.185 puts restrictions on giving 'loan' (and not 'advance') to directors. 'Loan' means lending of money with absolute promise to repay, whereas 'advance' is to be adjusted against supply of goods and services. One can argue that advance given against current month's salary is not loan. However, it will be difficult to make this argument if advance is given for 3 months, which will be in the nature of loan.