"A" company has provided Corporate Bank Guarantee to Bank for Rs.10 Cr on 19th September 2016 to its wholly owned subsidiary'B" . "B" allotted further rights shares to other company "C" effective 5th Sep inadvartantly . Upon such issue , company "C" became holding company of "B" resulting in violation of section 185 from the company "A'. Suggest remedy for the violation.
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Violation of section 185
Replies (1)
ACCORDING TO SECTION 185 OF THE COMPANIES ACT 29013 , A HOLDING COMPANY CAN PROVIDE LOAN , GURANTEE OR SECURITY IN CONNECTION WITH LOAN TO ITS WHOLLY OWNED SUBSIDIARY COMPANY . THERE IS NO VIOLATION OF SECTION 185 AND FURTHER A HOLDING COMPANY CAN PROVIDE CORPORATE GURANTEE OR SECURITIES IN CONNECTION WITH LAON ON BEHALF OF SUBSIDIARY COMPANY BUT CANNOT PROVIDE LOAN.
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