Can one company give Loan to other company or its Associated or subsidiary more than its share capital, free reserve and security premium?
Thank in advance sir/Mam
Replies (6)
Quick Summary
This discussion clarifies whether one company can provide loans or advances to another company, including associated or subsidiary entities, exceeding its share capital, free reserves, and security premium. The consensus is that a special resolution passed in an extraordinary general meeting (EGM) or annual general meeting (AGM) is typically required prior to granting such loans, as per Section 186 of the Companies Act. Exceptions exist for NBFCs/banks or loans to wholly-owned subsidiaries, but generally, member approval is essential.
@ Sabyasachi It can be passed in AGM/EOGM whichever is early ...
Guest
Just to add to the points already made by the Professionals, as per section 186 the Special resolution must be passed 'prior' to giving the loan in any general meeting.
Ordinary Course In Business Only when certain criteria are fulfilled ,if the question relates to Nbfc/bank then there is no need for any approval even exceeding NW , or when the borrower is WOS which is not in this case ,so PRIOR member approval in general meetings is essential ....
Leave a Reply
Your are not logged in . Please login to post replies