Inter -company loans and investments

*RENU SINGH * (✩ §m!ℓ!ñġ €ม€§ fℓม!ñġ ђ♪gђ✩ )   (21627 Points)

25 July 2011  

Inter -company loans and Investments

 

                                                               Sec 370                          Sec 372

The provisions of section 370 and 372 have been combined with sec 372 A

 

Ceiling of loans, guarantee , Investments ----

            Company cant directly or indirectly

·        Make any loan, guarantee /provide security to any body corporate.

·        Acquire securities by way of subscripttion or otherwise of any body corporate.                       

§  Exceeding 60 % of aggregate of its paid up capital and free reseves.

§  100% of free reserves whichever is more.

 

Provision regarding ABOVE

Within prescribed limits

Beyond prescribed limits

Pass a resolution at the board meeting

Obtain prior approval of shareholder by way of special resolution (rule4 of co passing of resolution by Postal ballot Rules 2001;

 

Obtain prior approval of concern public financial institution in case of default made in payment of a loan.

Obtain prior approval of  concern public financial institution;

Pass a resolution at BM

                                                                                    Spl resolution must specify -      

o   Specific limits

o   Particulars of body corporate.

o   Propose of investment loans and security.

 

The  board may give guarantee  Without being previously authorized by SR if ….. (not incl loans and others.)

v A resolution passed at board meeting

v Due to exceptional circumstances

v The resolution of board is confirmed within 12 months of AGM Or GM whichever is earlier.

 

For the loans given by the co-----

a)   Its rate of int should be lower than bank rate of RBI

b)   All the particulars regarding loans and investments should be recorded within 7 days of transactions and should be kept open for inspection by any member.

c)   Company in default u/s 58A cant make any investment , loans until such default continues.

 

EXCEPTIONS

Ø Banking / Insurance/ house financing/ industrial financing

Ø A co. whose principle business is acquisition of shares,debentures, stocks and securities .

Ø A private co.

Ø The co whose shares is allotted in pursuance of sec 81(1)(a)

Ø A loan/ guarantee by holding co to its subsidiary company for acquisition

 

Penalties

ü Rs.50000 or Rs. 50000 with imprisonment

ü RS.5000  for non maintenance of register for RS.500 /day.

 

 

Thanks and regards

Renu