Now even private companies cannot give loans to directors?

Dear friends,

 

Section 295 of Companies Act 1956 relating to loans to directors etc. did not apply to private companies.  Now corresponding Section 185 of Companies Act 2013 which has become effective from 12.9.2013 does not provide for such exemption to private companies.

 

Even in case of public companies such transactions could be entered into at the most with the approval of the Central Govt.  However, it seems Section 185 of new Act puts total ban on such transactions, excepting loans to MD/WTD as part of conditions of service extended to all employees or pursuant to scheme approved by members by special resolution.

 

Members may please deliberate on this important issue.

 

Thanks

 

Replies (6)

Yes, I agree with your view. At least private companies should have been given exemption as before. Further what about the private companies which have already given loan to its directors in accordance with the Companies Act, 1956 before applicability of this section ??

Existing loans given by private companies as per Companies Act 1956 will not be affected by the new provision.  Only new loans will be governed by the new provisions.

 

 

The new Act has not come into force except section 1.

Section 185 relating to loan to directors has been notified  w.e.f. 12-09-2013 and as such no company cannot give any loan to directors or other entities in which director/s is/are interested. According to it no loan is now possible between holding/subsidiary/group companies.

The new section 185 of Companies Act 2013 has been specifically introduced for the said purpose which makes it now not possible for loan even to subsidiary forget Director, not sure whether it is a drafting error or intentional. The subsequent section 186 defines the limit for eligible Companies but private ltd Companies are now not eligible where as earlier the exemption from intercompany loan section 295 was only for private companies.

private company sanctions a loan to a director in april 13 Board meeting

the amount is disbursed in March 14

will it be covered under old provisions

also what about old loans given in 2010 to directors

 

 

 


 

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
ARTICLESHIP 07 October 2026
Article assistant

S.K.Bajpai & Co.

Noida

B.Com

View Details
Company
ARTICLESHIP 07 October 2026
Article Assistant

Malhotra Rajesh & Associates

New Delhi

B.Com

View Details
Company
16 October 2026
CA article trainee

Zerdi & Co. Chartered Accountants

Pune

CA Inter

View Details
Company
12 October 2026
Finance

I-Genext Consulting Private Limited

New Delhi

CA

View Details
Company
ARTICLESHIP 01 October 2026
Articled Assistant

KPSN & Associates LLP

Chennai

CA Inter

View Details
Company
ARTICLESHIP 28 September 2026
Junior Accountant

J S P M & Associates LLP

Pune

B.Com

View Details
Company
08 October 2026
SALES TELECALLER

HIRE NOVA

Lucknow

Graduate (Any)

View Details
Company
07 October 2026
Senior Account Manager

Amplio Invest

Mumbai

M.Com

View Details