my one of client (company) issued some of its shares on premium.
share pemium amount used for giving loans to its sister concern companies directly or indirectly.
Can anyone tell me wether it is allowed for private limited as well as public limited ??
what are the penal consequences for both companies???
Yes, it is permitted subject to compliance of applicable legal formalities for giving loans.
What Sec.52 restricts is debiting Securities Premium Account (which appears on liabilities side of the Balance Sheet). It does not restrict using Bank balance as such (part of which could be out of share premium and other business activities).
Gupta Sachdeva & Co. Chartered Accountants
New Delhi
CA Final
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