SECTION 185 OF COMPANIES ACT 2013- A SIMPLIFIED APPROACH
SECTION 185 OF COMPANIES ACT 2013-
A SIMPLIFIED APPROACH
As per Section 185 of the
Companies Act 2013 which is effective from 12th September 2013, the
following points are to be noted in relation to loan and/or guarantee and/or
security to be provided:
1) A
private or public company can’t grant loan or can extend guarantee or provide
security (in relation to any loan) to its directors, or director of holding
companies or relative of directors.
2) A private company can’t provide loan or
extend guarantee to another private
company if there is a common director or common directors in both the companies.
3) A private company (lender/guarantor
company) can not provide loan or extend guarantee to another private company (borrower
company) if the lender/guarantor company’s director or directors are
shareholders of the borrower company.
4) A private company can’t provide loan or
extend guarantee to any firm in which any director of such private company or
his relative is a partner.
5) A private company (lender/guarantor
company) can’t provide loan or extend guarantee to any private company in which the director of such lender/guarantor
company is a shareholder.
6) A private company can’t grant loan or
extend guarantee to a public company
if any one or more director whether alone or together holdes 25% shares.
7) A public company can’t grant loan or
extend guarantee to any company (private or public) if any director along or
alongwith other directors’ are holding 25% shares or more in that company (borrowing
company)
8) A public company can grant loan or
extend guarantee to any public
company provide that the directors (one or more) of guarantor company
are not holding 25% or more voting shares in the borrowing company.
9) Any company (private or public) can’t
provide any loan or extend guarantee to any body corporate, the Board of
directors, managing director or manager, whereof is accustomed to act in
accordance with the directions or instructions of the Board, or of any
director or directors, of the lending/guarantor company.
10) A public company may provide loan or
extend guarantee to another public company even if there are common directors
provided that conditions of point 8 and 9 above are complied with.
11) Any company (private or public) can
provide loan or extend guarantee to its a managing or whole-time directoras a
part of the conditions of service extended
by the company to all its employees or pursuant to any scheme
approved by the members by a special resolution
12) Any company (private or public) can
provide loan or extend guarantee or provide security if it is in the ordinary
course of its business at an interest
is charged at a rate not less than the bank rate declared by the Reserve Bank
of India.
RELATIVE
A person shall be deemed to be
the relative of another, if he or she is related to another in the following
manner, namely:-
(i)
If
they are members of a Hindu Undivided Family;
(ii)
they
are husband and wife; or
(iii)
Father:
Provided that the term “Father” includes step-father.
(iv)
Mother:
Provided that the term “Mother” includes the step-mother.
(v)
Son:
Provided that the term “Son” includes the step-son.
(vi)
Son’s
wife.
(vii)
Daughter.
(viii)
Daughter’s
husband.
(ix)
Brother:
Provided that the term “Brother” includes the step-brother;
(x)
Sister:
Provided that the term “Sister” includes the step-sister.
Disclaimer:
This is not an opinion. Prior advise should be obtained before acting on the
same.
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