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Section 185

07 January 2018

Can a holding company give loan to director of subsidiary company?
note: the person is director in subsidiary company only.

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6 Replies

Yash Lahoti (101 Points)
Replied 07 January 2018

Yes, as per the Companies Amendment Act 2017 to section 185 (effective from 3rd January 2018), A company may advance any loan subject to conditions that

(a) a special resolution is passed by the company in general meeting:

Provided that the explanatory statement to the notice for the relevant general meeting shall disclose the full particulars of the loans given, or guarantee given or security provided and the purpose for which the loan or guarantee or security is proposed to be utilised by the recipient of the loan or guarantee or security and any other relevant fact; and

(b) the loans are utilised by the borrowing company for its principal business activities.

Adarsh Agrawal (student) (64 Points)
Replied 08 January 2018

Yes. No restriction to it.

Ranga Rajan (17 Points)
Replied 08 January 2018

Thank you.

Dipanshu arora (CA Final Student) (418 Points)
Replied 08 January 2018

Since, the loan is given to director of subsidiary company by its holding company, so question of utilising the same for the purpose of business of subsidiary? Will you please clarify this .

Yash Lahoti (101 Points)
Replied 08 January 2018

condition (b) is applicable only if the borrower is a company

Law Aspire (CS) (755 Points)
Replied 10 January 2018

Originally posted by : Yash Lahoti
	Yes, as per the Companies Amendment Act 2017 to section 185 (effective from 3rd January 2018), A company may advance any loan subject to conditions that (a) a special resolution is passed by the company in general meeting: Provided that the explanatory statement to the notice for the relevant general meeting shall disclose the full particulars of the loans given, or guarantee given or security provided and the purpose for which the loan or guarantee or security is proposed to be utilised by the recipient of the loan or guarantee or security and any other relevant fact; and (b) the loans are utilised by the borrowing company for its principal business activities.