As per Section 185: No Company ( Private & Public)
· Directly or Indirectrly
· Advance any loan, including book debt,
· to any of its directors or to any **other person in whom the director is interested
· Any guarantee or provide any security in connection with any loan taken by him or such other person
**TO ANY OTHER PERSON IN WHOM DIRECTOR INTERESTED MEAN :
i. Any other director of the lending company, or of the holding company of the lending company
ii. Any partner or relative of such director
iii. Any private company of which director is a director or member
iv. Body Corporate in which 25% or more voting power rests with one or more directors
v. Body Corporate whose Board accustomed to act on directions of BOD or Directors of lending company.
**But after publication of Exemption Notification on Private Limited Companies
(Dated 05.06.2015): (yet to be notified)
The above restriction will now no longer be applicable to the Private Companies which satisfies All The 3 Conditions mentioned below:
a) In whose share capital no other body corporate has invested any money;
b) If the borrowings of such a company from banks or financial institutions or any body corporate is less than [lower of (i) Two times of paid up share capital or (ii) Rs. 50 Crore]; and
c) Such a company has no default in repaymnt of such borrowings subsisting at the time of making transactions under this section.
**But after Companies Amendment Act, 2015,
Provisions of Section 185 will not applicable on followings:
(c) Any loan made by a Holding Company to its Wholly own Subsidiary Company or any guarantee given or security provided by a Holding Company in respect of any loan made to its wholly own subsidiary Company,
(d) Any guarantee given or security provided by a Holding Company in respect of Loan made by any Bank or financial institution to its subsidiary Company.
Provided that the loan made under clauses (c) and (d) are utilized by the subsidiary company for its principal business activity.
LOAN TO DIRECTOR
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