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inter corporate loan

15 March 2018

Company A is subsidiary of Company B now company A can't avail loan from its holding company.. But company C in which one director of Company A is director (not in company B) now my query is can company B give loan to Company c.... Please guide me..

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8 Replies

Vinayak Mishra (192 Points)
Replied 15 March 2018

Section 185 is applicable in this case. Before the amendment in 2015, there is complete prohibition for giving loan to subsidiary co but now holding co can give loan to its subsidiary again after the amendment in 2017 companies can give loan to the Other companies in which director of lender companies is also a director even in all those companies who are the subsidiary company of second mentioned company subject to the following conditions :
1) Pass special resolution
2) Use of money in its principle activities.
Thus company B can give loan to company A as well as company C.

chandni mathur (CS) (84 Points)
Replied 15 March 2018

From which date that amendment is applicable

Vinayak Mishra (192 Points)
Replied 15 March 2018

Companies amendment 2017 effective w.e.f. January 2018

chandni mathur (CS) (84 Points)
Replied 15 March 2018

Subsidiary company take loan from its holding company in Nov 2017.....

Jatin Bajaj (CS) (2930 Points)
Replied 15 March 2018

As per the provisions of the Section 186 of the Companies Act 2013, read with Rule 11 of Companies (Meeting of its Board and Power) Rules 2014, a Company can give loan to any Body corporate. So Company B can give loan to Company C.

As per Rule 11 of Companies (Meeting of its Board and Power) Rules, a holding company can give the loan to its wholly owned subsidiary company just by passing Board resolution even if it exceeds the limit as specified in section 186. no need to pass special resolution. So B can also give Loan to A.

Vinayak Mishra (192 Points)
Replied 15 March 2018

Company B can give loan to its subsidiary A by passing board resolution but for company C special resolution is required to pass because Co. C, have a director who holds the position of director in co. B also ( provision relegating to "person in whom director is
interested" of section 186 comes into picture),thus after CA Amendment, 2017 special resolution is required and adherence of conditions are also require.......,,,,,

chandni mathur (CS) (84 Points)
Replied 15 March 2018

Can holding give loan to its subsidiary.. In this Co A is subsidiary of Company B 3 DIRECTORS are common.... As per section 185.. Explanation clause c where private company of which any such director is a director or member......

Jatin Bajaj (CS) (2930 Points)
Replied 16 March 2018

As per the Provisions of Section 185, read with Companies (Meeting of Board and Power) Rules 2014, a holding company can give loan to wholly owned subsidiary Company and can provide gurantee or security in connection with loan to its subsidiary Company. But Holding Company cannot give its Loan to its Subsidiary Company.

In your case if A is wholly owned subsidiary of B , then B can give Loan to A but if its Subsidiary then B cannot give Loan to A