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Loan to subsidiary company

Amisha (Asst. Company Secretary) (205 Points)

24 March 2011

Dear All

A listed public company (A) is holding more than 80 % share in a pvt. co.(B). Now A wants to make loan to B. What wud b the applicable provisions. If in case anybody have a draft resolution pls attach.

Thanks & Regards,

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SANTOSH SHAH (Company Secretary) (754 Points)
Replied 24 March 2011

Originally posted by : Amisha
	Dear All A listed public company (A) is holding more than 80 % share in a pvt. co.(B). Now A wants to make loan to B. What wud b the applicable provisions. If in case anybody have a draft resolution pls attach. Thanks & Regards,

Hi Amisha

Please refer the provisions of Section 372 A of companies act.

Its case of Inter-Corporate Loan, the loan made is subject to the limits as per section 372A.

It should not exceed 60% of Paid up sharecapital + free reserves or 100% of its free reserves which ever is higher.

Other views welcome.

regards

Santosh Shah

Jayashree S Iyer (Company Secretary) (3224 Points)
Replied 24 March 2011

I would like to add further that any loan exceeding the limits specified as above shall be made subject to previous authorisation by a special resolution passed in a general meeting.