Is there any restriction on private company to give unsecured loan without interest to any individual or any other company?
Pls. reply
Ashish Sharma (Service) (1028 Points)
11 March 2010Is there any restriction on private company to give unsecured loan without interest to any individual or any other company?
Pls. reply
Yogesh Shah
(Managing Corporate Finance)
(1051 Points)
Replied 11 March 2010
Hye Mr. Ashish,
Private Company can give unsecured loan to any company or individual.
Section 372A of Companies Act has put restrictions on inter-corporate loans. However, these are applicable only to public company and not to private company, unless it is a subsidiary of public company.
However, it will be prudent practice to ensure that giving such unsecured loan is in benefit of company and the receiver of loan is financially strong enough to repay it with due regularity. (To any experts - if I am wrong, kindly let me know)
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