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loan by subsidiary to its Holding

Kanika Gupta (C.S Trainee) (100 Points)

19 July 2010

Can a subsidiary give loan to its Holding company ? whether provisions of Section 295 would be attracted ?? if yes plz give reasons...

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Rohit Ghaisas (Trainee) (22 Points)
Replied 20 July 2010

Dear Kanika,

The provisions of Section 295 would be attracted i.e. prior approval of Central Govt. would be mandatory in such case.

Kindly refer to Section 295(1)(a). I m reproducing Clause (a) for your perusal "any director of the lending Company or of a Company which is its holding Company or any partner or relative of any such director".

However, if the holding Company is a Private Company, then Section 295 will not be attracted (kindly refer Clause(s) (a), (b) and (c) of Sub - Section (2) of Section 295.

Best Regards