Dear All,
Advancing any loan, giving of guarantee and providing of security to public company, where the director of lending company is director or member is not covered under section 185 of the Companies, 2013.
Does it mean, private company or public company can advance any loan, give guarantee and provide security to public company where the director of lending company is director or member in public, since it is not explicity prohibited under section 185 of the Companies Act?
Yes, subject to compliance of other provisions such as Sections 179, 186 etc.
Section 185 do have some restriction on lending company in giving loan to a public company in which the director of the lending company is interested. Section 185(1) restricts a company from providing loan to its director or any such other person in whom the director is interested.
Other person explanation under sec 185 includes:
any body corporate at a general meeting of which not less than 25% of the voting power may be exercised or controlled by any such director or by two or more such director together or any body corporate, the board of directors or managing directors is accustomed to act in accordance with the direction or instructions of the board or of any director or directors of the lending company.
If any of the above criteria is met, then the lending company cannot give loan to a public company under section 185 of companies act, 2013.
Thanks & Regards,
Antony Edgar
CAclubindia
