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Loan to directors section 185 of companies act. 2013

CS Satish Butoliya (Company Secretary & Compliance Officer) (36 Points)

25 November 2013

Can pvt co. give loan to a limited co. or a limited co. can give the loan to a limited co. if its have one common director? can its fall under section 185 of companies act, 2013 or not.

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CA Deepesh Ruhela (Keen to Learn) (3271 Points)
Replied 26 November 2013

Yes, pvt co. can give loan to a limited co. or a limited co. can give the loan to a limited co.,having one common director. if such case not fall in following prohibited transactions:

No Company advances any loan to anybody corporate at a general meeting of which not less than twenty five per cent of the total voting power may be exercised or controlled by any such director, or by two or more such directors, together; or
No Company advance any loan to anybody corporate, the Board of directors, managing director or manager, whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or directors, of the lending company.

Section 185 of the Companies Act, 2013 is applicable on private company as well as public Company.

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The Company Law Desk (CA Practice ) (103 Points)
Replied 15 April 2014

One consideration which has been missed is that the Acceptance of Deposits Rules, 2013 also exempts inter-corporate loans from perview of deposits. Thus restricting to the provisions of section 185, inter-corporate loans can be advanced with an ease.

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