Section 185 of companies act 2013

Ravi Rawat (Chartered Accountant) (116 Points)

12 November 2013  

Section 185 prohibts loan by company to or guarantee or security for loan taken by:

1.        Directors

2.        Director of holding company

3.        Partners or Relatives of Directors

4.        Firm in which director or relative of director is partner

5.        Pvt. Co. in which director (of lending company) is director or member

6.        Body Corporate in which 25% or more voting power rests with one or more directors (of lending compay)

7.        Body Corporate whose Board act on directions of director/board of lending company.


Not covered:

1.      Pvt. Company in which relative of director is director or member

2.      Loan to subsidiary company. There may be some conflict (point 5 above) as directors of subsidiary company may be directors in holding company too.

3.      Loan provided in ordinary course of business at interest (not less than bank rate).


No exemption to Pvt. Ltd. Companies. Applicable to all companies including banking companies.