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Loan to directors

vaishali gupta (22 Points)

03 January 2018

Can a private company give loan to its directors or any other company or firm...?

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4 Replies

Rishi Mehta (Ur friend ) (1533 Points)
Replied 03 January 2018

Private company cannot give loan to any of its director.

Akash Makhija (56 Points)
Replied 04 January 2018

if these 3 condition are fulfilled then private company can give loan to its director. which is clearly mentioned in section 185.which is as followed.

1.No other body corporate should have invested in the private company i.e no other body corporate should have share capital of the private company

2.Borrowing of such pvt company from bank or financial institutions or any other body corporate is less than 2 times of its paid up share capital or 50 crores, which ever is lower.

3. should not have made any default in repayment of borrowing.

CSpriyanka Mishra (cs) (49 Points)
Replied 05 January 2018

agree with Akash

1 Like

Yash Lahoti (101 Points)
Replied 06 January 2018

As per the amendment to section 185(2) dated 3rd Jan,2018, A company may advance any loan subject to the condition that:

(a) a special resolution is passed by the company in general meeting

Provided that the explanatory statement to the notice for the relevant general meeting shall disclose the full particulars of the loans given, or guarantee given or security provided and the purpose for which the loan or guarantee or security is proposed to be utilised by the recipient of the loan or guarantee or security and any other relevant fact; and

(b) the loans are utilised by the borrowing company for its principal business activities.