Dear Friends
The Companies Act 2013 with reference to "Loans to Directors" says that :
a company cannot, directly or
indirectly,
– advance any loan, including any loan represented
by a book debt to any director or any other person
in whom the director is interested (as specified); or
– give any guarantee or provide any security in
connection with any loan taken by its director or
such other person
• The above restriction is not applicable to
– Loan to a Managing Director / WTD which is as a part of contract
of services extended to all its employees or
pursuant to any scheme approved by members by
special resolution
– A company which in the ordinary course of its
business provides loan, guarantee or security (for
due repayment of any loan) and charges interest
which is not less than Bank Rate declared by RBI.
Can anyone please provide logic/reason for the highlighted portion?? I cannot seem to grasp the logic for the same
Regards
CAclubindia
