Latest clarification w.r.t. section 185_14.02.2014

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Ankur Garg

Company Secretary and Compliance Officer

114788 Points Joined January 2009

Latest Clarification w.r.t. Section 185 of the Companies Act, 2013 on holding - subsidiary companies.

Dear All,

Today, Ministry of Corporate Affairs has issued a General Circular clarifying the applicability of Section 185 of the Companies Act, 2013 on holding - subsidiary companies. MCA has clarified that exemption as provided in Section 372A(8)(d) of the Companies Act, 1956 shall be applicable in respect of guarantee given or security provided by a Holding Company for loans made by a bank or financial institution to its Subsidiary Company and this exemption will be available till Section 186 of the CA, 2013 is notified.

Further, the above exemption will be applicable to cases where loans so obtained are exclusively utilized by the subsidiary for its principal business activities.

Please find attached herewith relevant MCA Notification. You may also download the same from the Link as mentioned below:

https://www.mca.gov.in/Ministry/pdf/General_Circular_3_2014.pdf

Regards

CS Ankur Garg

Attached File : 132189 1286362 general circular 3 2014.pdf downloaded: 305 times

Replies (2)

P C Agrawal

Registered independent director Past Ch

8229 Points Joined March 2007

Dear Mr Ankur,

Thanks for sharing the circular.

It is not clear whether any new clarification has been given in the circular by MCA. In the past, MCA has issued following circulars:

1. Circular dated 18.9.2013 clarifying that consequent upon notification of 98 Sections of Companies Act 2013, corresponding sections of Companies Act 1956 have ceased to be effective. (Accordingly, Section 295 of CA 1956 is not effective now since corresponding section 185 of CA 2013 has been notified. But Section 372A of CA will continue to be effective since corresponding Section 186 of CA 2013 has not been notified.)

2. Circular dated 19.11.2013 clarifying once again that Section 372A of CA 1956 continues to be in force since Section 186 of CA 2013 has not been notified. (In this circular also nothing new was clarified.)

3. Now this Valentine Day circular dated 14.2.2014 again clarifies that exemption u/s 372A(8)(d) will be available till Section 186 is notified. (Again in this circular also nothing new seems to be there.)

Further, it seems MCA has wrongly mentioned Section 185 instead of 186 at a few places in the circular.

Regards,