Dear Professional Colleagues,
One of the Limited company has taken loan from bank by mortgaging Company's property at location X.
Another Limited company having same directors needs to apply for loan from bank mortgaging company's property at location Y. But here Banks are not agreeing to provide them loan due to same directorships under section 185.
Need your views on the same.
Regards
Purvi Kakani
Section 185 prohibits any company from giving loans, guarantees and securities in favor of its directors or to any other person in whom the director is interested in, except if the company is in the business of lending and financing.
It is not clear from your post whether the Location Y is owned by Company A or Company B. No justification if Company B is the owner. If otherwise, Bank is probably sighting the section as the Location Y belongs to Company A.
There are certain exemption or solutions, you may take help of an expert professional in this matter.
Sec 185 prohibits to company giving the loan to director and in which director is interested. It does not prohibit to other to provide the loan to company.
In your query, the bank is not providing the loan to company B in accounts of same directorship. It is not justified in law.
Thank you all for your replies. However, does section 185 become applicable to above transaction. In case yes, then how. Coz sec 185 prohibits company from giving loans to its directors.
In my query, no director is availing for loan but company is availing for loan by providing its property.
Please suggest.
CAclubindia
