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Loan provisions

Mayank Jain (Student) (67 Points)

24 June 2016

Can a Public Company give Guarantee to NPO and Trust in which same persons are hold the manaderail position?

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3 Replies

Jatin Bajaj (CS) (2930 Points)
Replied 25 June 2016

Yes, it can give gurantee to NPO or Trust. Kindly refer section 186 of companies act 2013

Mayank Jain (Student) (67 Points)
Replied 27 June 2016

Dear Jatin bhai,

Thank u for your gentle reply, but section 185 does not allow the same beacause trust comes in the defination of body corporate and body corporate is prohibited as per "explanation" given in the same section, so what is the way out of the same?

Jatin Bajaj (CS) (2930 Points)
Replied 27 June 2016

Dear Mayank bhai,

As per section 186(2) of companies act 2013, a company can give give loan loan to any person or body corporate upto 60% of paid up share capital + free reserve+ securities premium amount 0r 100% of free reserve+ securities premium amount by passing board resolution in board meeting. for this kindly refer section 179(3)(f). For a public company form MGT 14 IS TO BE SUBMITED ALONG WITH COPY OF BOARD RESOLUTION. BUT IF COMPANY WANTS TO GIVE LOAN IN EXCESS OF LIMIT MENTIONED UNDER THE ABOVE RULE, COMPANY HAS TO PASS SPECIAL RESOLUTION

KINDLY ALSO REFER RULE 11 OF MEETING OF BOARD AND POWER RULES WHICH STATES THAT IF SUCH NGO COMPANY OR ANY COMPANY IS WHOOLY OWNED COMPANY OF THAT HOLDING COMPANY THEN NO NEED TO PASS SPECIAL RESOLUTION EVEN IN EXCESS OF 60% OR 100% AS THE CASE MAY BE. JUST PASS BOARD RESOLUTION IN BOARD MEETING