Loan By one co. to another co. having 1 person as A Director

Sections 370 and 372 have been made inoperative w.e.f. 31.10.1998 by the Companies (Amendment) Act, 1999. Instead section 372A has been introduced under which, provisions of section 370 and 372 relating to inter-corporate loans and investments etc. have been merged and a combined ceiling of 60 per cent of the aggregate of paid up share capital and free reserves or 100 per cent of the free reserves, whichever is higher, has been introduced, for exercise of powers by the Board of directors of a company.

Prescribed ceiling limit of 60% as above, also includes the amounts of corporate guarantees and securities provided under section 372A.

- No company shall make loans or investments or provide guarantee or security, if it has defaulted in complying with the provisions of Section 58A [ Section 372A(4)].

Further to the reply by Arun Dogra, when the loan amount does not exceed limit already discussed, the boad can itself make a loan...

If the loan exceed the limit PRIOR SPECIAL RESOLUTION in general meeting is must....

However the total loan amount should not exceed the net worth of the lending company....

IN ADDITION TO THE ABOVE THE FOLLOWING SEC. WILL ALSO APPLY

Sec.295

Except with the previous approval of Central Govt, a public co. cannot directly / indirectly make a loan to any body corporate in which 25% or more of total voting power is exercised by one or more directors of first company...

or the board / MD / Manager is accustomed to act in accoudance with directions  of any director of lending company....