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Applicability of section 185 & 186 of companies act 2013

Companies Act 2013 2665 views 4 replies

Sanjay

Associate

152 Points Posted on 22 April 2017

Holding Company have given loans to 4 Wholly owned subsidiaries ("WOS") and to 3 fellow subsidiaries. All are having common directorship. Further all loans are interest free.

So i will need to give Qulaified opinion in Audit report of Holding company for not complying the provision of Section 186 since loans are given at free rate of interest and for Section 185 for giving loan to Fellow Subsidiaries.

Replies (4)

Sudhir Todkar

CS Professional

1021 Points Posted on 22 April 2017

As per companies act 2013 section 186, No company can give loans to anyother company less than the interest rate lower than the interest prevailing yeild of one, three, five, or ten years government security closest to the tenor of the loan.

Company should also get prior approval of financial institutions if term loan is subsisting. They should not give loans or advance if they have defaulted in payment of deposit or Interest there on.

The company can give loans or guarantee to it's wholly on subsidiary companies or joint venture company.

Jatin Bajaj

2942 Points Posted on 24 April 2017

According to section 185(1)(b) of section 185, Holding Company cannot give intrest free Loan to its wholly owned subsidiary Company for the repayment of Loan and in respect of such Loan , it shall not be charged at the rate of intrest less than the RBI. And further there is no restriction in providing Loan by Holding Company to its wholly owned subsidiary Company even if there are common Directors