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Section 185 of ca,2013

Manik (CA-Final) (53 Points)

23 June 2016

I'm on an audit of a company and facing a problem w.r.t to company law and request you to please provide a solution for the same. Here it is:

There are 4 companies with a common direcctor, lets say A,B,C and D.

Now Co A is giving loan to Co B on 2nd June 2015 for rs 9 lacs which was repaid within 2 months and then another loan was given on 18th feb 2016and was repaid in installments by 28th march.

Now as per section 185 of CA,2013 or any other section of the act, is this loan a violation of the act? Or is there anything else that I should look into for this matter.

Waiting for an early reply

Thank You

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8 Replies

CS Arjun Rajagopal (B.com, ACS) (1056 Points)
Replied 23 June 2016

Dear Manik,

There is no violation in giving loan to other company. If the loan value exceeds 60% of Paid up share capital, free reserves and securities premium account or 100% of free reserves whicever is more. Then Section 186 attracts. Are u undertaking Secreterial Audit or Financial Audit?

Manik (CA-Final) (53 Points)
Replied 23 June 2016

Statutory Audit

P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad) (8229 Points)
Replied 23 June 2016

If the case is covered u/s 185, loan is prohibited and you will have to give details thereof in your as report per requirements of CARO 2016.

1 Like

RBGohil (Associate) (41 Points)
Replied 23 June 2016

Also you requires to make the disclosure as per sec 186(4) in financials by way of notes to accounts.

Jithin scaria (Practicing Company Secretary) (112 Points)
Replied 24 June 2016

As per Notification date 05.06.2015 sec 185 shall not apply to following private companies

1. in whose share capital no other body corporate has invested any money

2. if the borrowings of such a company from banks or financail institutions or any body corporate is less than twice of its paid up capital or 50 crore rupees whichever is lower

3. Such a company has no default in repayment of such borrowings subsisting at the time of making transactions under this section

1 Like

Vijay Dixit (Student CS) (100 Points)
Replied 24 June 2016

01. yes, this is violation of section 185 of CA 2013(2nd June 2015)

02. If this is a private compnay conditions specified in Notification dated 05.06.215 should be comlied to get exemptions (18th feb 2016)

03. If the company is a public company then it is a violation of CA 2013.