Hi everyone,
Our company wants to give unsecured loan to its group company. both the companies have same MD. Loan would without interest.
is it possible?
Please let me know with relevant section applicable
Thanks in advance
Mishu (CA) (90 Points)
26 August 2011Hi everyone,
Our company wants to give unsecured loan to its group company. both the companies have same MD. Loan would without interest.
is it possible?
Please let me know with relevant section applicable
Thanks in advance
G.L.Subhramanian
(PCS)
(206 Points)
Replied 26 August 2011
Hi Isha,
Section 372A talks about intercorporate loan.
(1) If your company is a private company, 372A is not attracted. You can give any amount loan to another company.
(2) If your company is the holding company (as you have mentioned it is a group company), 372A is not attracted. You can give any amount loan to another company.
(3) If your company is a public company, 372A is attracted. You cant give loan without any interest. 372A (3) talks about interst rate not being lower than prevailing bank rate. You should abide by the provisions of Section 372A.
Regards,
Subbu
Mishu
(CA)
(90 Points)
Replied 26 August 2011
Thanks Mr. Subramanium,
Both the companies are Public company. and we want to make unsecured loan without interest.
G.L.Subhramanian
(PCS)
(206 Points)
Replied 26 August 2011
Hi Isha,
I feel you cant give unsecured loan to another company without charging interest as ....
it is a public limited company -> attracts Section 372A -> rate of interest should be not lower than the existing bank rate.
As my name was mispelt mostly, i had resorted to Subbu. Kindly address me with the same.
Regards,
Subbu
Mishu
(CA)
(90 Points)
Replied 30 August 2011
Section 372A will be applicable only when amount of loan exceeds 60% of paid up +free reserves or 100% of free reserves.
The amount of unsecured loan which our company would be giving is less then the above limit.
So plz let me know if we can give loan with interest.
Dipjyoti Majumdar
(CA in service & CS. dipmaj@ rediffmail.com )
(3468 Points)
Replied 31 August 2011
You should also verify if section 295 is attracted.
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