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Section 185

shubhra (Company Secretary) (64 Points)

20 December 2013

Dear All,

Since Companies Act, 2013 is silent on transitional provisions. I have a query as follows:

Company A Pvt Ltd has advanced some amount to B Ltd (group company and listed) for business transactions. B Ltd has pending works and has not completed the work for which the advance was taken................... Now the amount is kept pending with B Ltd.

My quuestion is:

1. Whether this transaction is covered under section 185 of Companies Act, 2013 (book debt/advance)

2. If covered, what shall be the action ? B Ltd has to repay it or this can continue till the transactions are completed.

Seeking your advice.

Thanks in advance.

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1 Replies

Syam Kamal (Company Secretary) (66 Points)
Replied 21 December 2013

On a reading of section 185 it appears that the section will not cover loan given by private company to public company unless the transaction falls in clause (d) and (e) of the explanation to the section. i,e in your case to hit by section 185, the director of A Pvt Ltd should hold at least 25 % of the B Ltd or the Board of B Ltd is accustomed to act in accordance with the directions of A Pvt Ltd.

In my view, an act which is done prior to the commencemnet of an Act, which was perfectly legal in accordance with the earlier act, do not require any further compliances unless other wise specified in the new act. Since in the absence of any of such provisions in 2013 act, B Ltd can go ahead with the transaction.

Any other view is welcome....