Section 295 -- advances to directors

According to Section 295 of the COmpanies Act, 1956, if a Public Company wants to give Loan / advance to Director, then the Public Co. has to obtain prior approval of the Central Government.

Here are certain requirements to be followed, to obtain approval from CENTRAL GOVERNMENT. That means, before applying for the approval, company needs to make sure that these all requirements are followed. Few examples are given below, i.e. what all information a company should provide to get approval from government:

1. Rate of Interest of Loan.
2. Amount of Loan/Security/Guarantee.
3. Terms and conditions attached with the Loan, if any.
4. Certain Documents are also sent, like-

• Copy of Board Resolution
• Copy of Loan Agreement
• Copy of List of Directors and other company, if any.
• Explanation Statement, justifying the amount, interest and terms attached to Loan.
• NOC of financial institutions.

Regards,
Devendra Kulkarni