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What are the exceptions to sec 185?

Open uri20170510 32134 1c996lj?1494421732 Anil asked almost 3 years ago

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3 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Chirag answered almost 3 years ago

LOANS TO DIRECTORS [SECTION 185] (1) Save as otherwise provided in this act, no company shall, directly or indirectly, advance any loan, including any loan represented by a book debt, to any of its directors or to any other person in whom the director is interested or give any guarantee or provide any security in connection with any loan taken by him or such other person. Provided that nothing contained in this sub-section shall apply to- (a) The giving of any loans to a Managing or Whole time director- (i) As a part of the conditions of service extended by the company to all its employees; or (ii) Pursuant to any scheme approved by the members by a special resolution; or (b) A company which in the ordinary course of its business provides loans or gives guarantees or securities for the due repayment of any loan and in respect of such loans an interest is charged at a rate not less than the bank rate declared by the Reserve Bank of India. ANALYSIS OF SECTION 185 OF COMPANIES ACT 2013 PRIOR TO AMENDMENT Applicability: Section 185 applies to both Public and Private Companies. Section 185 prohibits the companies: I. For providing any loan to its directors or any other person to whom such a director is interested. II. For giving any guarantee or security in connection with such loan taken by director or any other person to whom such a director is interested. EXCEPTIONS TO SECTION 185: Clause (a): A company can provide a loan to Managing Director or Whole time Director as a part of condition of service extended by the company to all its employees; or any scheme approved by the members by a Special Resolution.Noted that: I. “Any other person in whom the director is interested” is missing under exception; hence the company shall not provide any loan to any other person to whom such managing director or whole time director is interested. II. Under exception the words “gives any guarantee or provide any security in connection with any loan taken by him or such other person” is missing; hence company shall not provide any guarantee or security taken by the managing director or whole time director or any other person to whom such managing director or whole time director is interested. Clause (b): A company whose principal course of business gives loans or gives guarantees or securities [SAY FINANCING COMPANIES] and interest is being charged in respect of such loans not being less than bank rate declared by the RBI.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 ranjan bhutani answered almost 3 years ago

Dear, a) MD/WTD – The giving of any loan to a Managing or Whole-time director- (i) as a part of the conditions of service extended by the company to all its employees; or (ii) Pursuant to any scheme approved by the members by a special resolution; b) ORDINARY COURSE – A company which in the ordinary course of its business provides loans or gives guarantees or securities for the due repayment of any loan and in respect of such loans an interest is charged at a rate not less than the bank rate declared by RBI.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Pankaj answered almost 3 years ago

a) MD/WTD – The giving of any loan to a Managing or Whole-time director- (i) as a part of the conditions of service extended by the company to all its employees; or (ii) Pursuant to any scheme approved by the members by a special resolution; b) ORDINARY COURSE – A company which in the ordinary course of its business provides loans or gives guarantees or securities for the due repayment of any loan and in respect of such loans an interest is charged at a rate not less than the bank rate declared by RBI.

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