There are 2 public companies Company A and Company B . X is a director of company A and a shareholder in company B. Shares of Company B are freely transferable. If X transfers its share in company A at a price higher than the value of the share (transfers share of 50 at rs 200 to company A) can this transfer be considered as a loan under section 295.
Its Urgent kindly reply
Shares of a public company are freely transferable. Further, section 295 is applicable on loan, security or guarantee, it is nowhere concerned with Share Transfer. Only book debts in the nature of advances are covered. In my opinion, section 295 should not attract. Experts opinion is solicited please.
The provision of section 297 get attracted only if there is underwriting of shares & debentures between the co & the specified person. Contrat between 2 public companies will not attract the provision of sectino 297 as the provison of 297 are applicable between a public co & the specified person.
also transfer of shares cannot be brought in the nature of borrowings, as there is no repayment required on the part of the director.
Gupta Sachdeva & Co. Chartered Accountants
New Delhi
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