Section 185

Co Act 2013 201 views 3 replies

Aniket Ambure

1 Points Joined March 2017

A Private limited company sells goods on credit to indicidual and partnership firm; where working director of such company, is directly and indirectly intrested. Can company sale goods on credit to such individual or firm? Would such transaction amount to breach of Section 185 of Companies Act? Is anything provided otherwise in the act; which can be put as exclusion of above deal from operation of Section 185 of the Act?

Replies (3)

Jatin Bajaj

2930 Points Joined April 2016

AS PER SECTION 185 OF THE COMPANIES ACT 2013 , NO COMPANY SHALL DIRECTLY OR INDIRECTDLY ADVANCE ANY LOAN INCLUDING LOAN REPRESENTED BY BOOK DEBTS. MEANS COMPANY CANNOT SOLD GOODS ON CREDIT . FOR EXAMPLE : IF WE SELL GOODS ON CREDIT TO THE COMPANY IN WHICH DIRECTOR IS INTERESTED AND THEN SUCH A OUTSTANDING AMOUNT IS TREATED AS BOOK DEBT WHICH IS PROHIBITED BY SECTION 185

Ravi Kiran Vustela

Knowledge Seeker

1353 Points Joined October 2016

rightly said by jatin Sir.....
however it is private limited company... there are 3 conditions given by MCA on 5th June 2015... if the private company satisfies all the three conditions. it can go (185 is not applicable to private companies subject to fulfilment of All the 3 conditions)

Bala

Chartered Accountant

43 Points Joined January 2013

Hello Ankit,

In my view, your query of normal business transaction (it is a debt outstanding and not loan advanced) should get sheltered u/s 188. A Board approval should suffice to cover the business transaction stated in your example.

Hope this helps.

Tnx

Balaji Srini FCA., LL.B.