LIVE GST Certification Course by CA Arun Chhajer begins 27th April. Register Now!!

Loan under Section 295

Kanika Gupta (C.S Trainee) (100 Points)

29 April 2011

Can a subsidiary give loan to another fellow subsidiary under section 295 of the companies act,1956?

Reply
Follow
Share

4 Replies

SANTOSH SHAH (Company Secretary) (754 Points)
Replied 29 April 2011

Originally posted by : Kanika Gupta
	Can a subsidiary give loan to another fellow subsidiary under section 295 of the companies act,1956?

Hi Kanika

In my view the case should fall under provisions of Sec 372 A ( Inter-Corporate Loan) and not Section 295

as the latter section is for loan to directors.

372A section is not applicable in case of pvt companies.

Other views solicited

regards

Santosh Shah

Vaibhav Shukla (Company Secretary) (142 Points)
Replied 29 April 2011

Dear Kanika,

First of all u need to specify as to whether the lending company is a private ltd company or a public ltd company for the simple reason that section 295 does not apply to private ltd. company. However, in case the lending company is a public ltd company than also it is to be seen that both the companies (i.e. lending company as well as borrowing company) does not have any common Director otherwise approval of the central government would be required.

Best Regards

ACS Vaibhav Shukla