Sec 295, Companies Act, 1956.

Others 1438 views 6 replies

Kitty

Manager

24 Points Joined March 2010

Dear All,

Pls let me know:

1) Is Sec 295 of the Companies Act to be read as applicable to " Directors of the Lending Company"?

2) Is Sec 295 of the Companies Act to be read as applicable to " when Lending Company is advancing loan to "B" and Security/ Guarantee is provided by "A" ?

Replies (6)

Ankur Garg

Company Secretary and Compliance Officer

114788 Points Joined January 2009

Kindly check the example below:

If company A is advancing loan to company B then in that case company A is the lending company. Here company A cannot provide loan to its director (Lending Company’s director) through company B or through other associates as mentioned in section 295.

Sanjay Singh Rana

208 Points Joined August 2008

hi kitty

Section 295 of the Companies Act regulates grant of loans by a public company (and its subsidiaries), barring exempted categories, to its directors, their relatives and the firms and companies in which they are interested, as mentioned in the said section. Therefore, the section provides that a company cannot make a loan, give guarantee or provide security in connection with such a loan without obtaining the previous approval of the central government.

this section is applicaple to only directors of company and their relatives and the firms and companies in which they are interested,

hope this will solve your query :)

take care