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Loan from subsidiary

Akanksha Gupta (Company Secretary) (70 Points)

15 February 2017

Good evening everyone!

I have a query. How can a Pvt. Ltd. Co. take loan from its subsidiary Co.? I mean Board approval would definitely be required. Does it require approval from the members also? Subsidiary is also a pvt. ltd. co.

What other compliance is required to be made to obtain the same?

I would request for an answer from perspective of both the Holding Co. and the Subsidiary Co.

Thank you all in advance.

Any suggestion/ clarification is deeply appreciated.

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2 Replies

Jatin Bajaj (CS) (2928 Points)
Replied 16 February 2017

According to section 186 of the companies act 2013, a company can give loan to any person or any other body corporate upto 60% of ( paid up share capital + free reserves+ securities premium) or 100% of free reserves and securities premium whichever is higher subject to the resolution passed by the board at the board meeting. However if company crosses the aforsaid treshold limit , then Company can give loan by passing special resolution in gm subject to the approval by members.

however as per Companies Meeting of Board and power rule , if the company give loan to its wholly owned subsidiary company exceeding the aforststed limit of 60 or 100% as the case may be then no need to pass special resolution. company can grant just by giving Board resolution

as per section 179 of the companies act , company need to file mgt 14 within 30 days of passing board resolution

but with effect from june 2015, private companies are exempted from filing mgt 14.

As per section 179 of the companies act the company boprrowing the money also need to pass the board resolution at the board meeting if the borrowing is less than the agregate of paid up share capital and free reserves. but if borrowing is more than the agregate of paid up share capital and free reserve company need to pass special resolution.

But w.e.f june 2015, section 180 is not applicable to private company. so company just need to pass board resolution even if borrowing exceeds agregate of paid up share capital and free reserves.

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