Consequent to notification of Sec 185 of Companies Act 2013 (dealing with loans to directors) and which is corresponding to Section 295 of the Companies Act, 1956, MCA has received several representations. Section 186 of the Companies Act, 2013 is yet to be notified. MCA has now clarified that Sec 372A of the Companies Act 1956 (dealing with inter-corporate loans) continues to remain in force till Sec 186 of Companies Act 2013 is notified. Text of the Notification is as follows :-
General Circular 18/2013,
Dated: 19/11/2013
No. 17/202/2013-CL-V
Sub: – Clarification with regard to applicability of provision of Section 372A of the Companies Act, 1956.
Sir,
This Ministry has received number of representations consequent upon notifying Section 185 of the Companies Act, 2013 dealing with loans to directors which is corresponding to Section 295 of the Companies Act, 1956. Section 186 of the Companies Act, 2013 is yet to be notified.
It is clarified that Section 372A of the Companies Act, 1956 dealing with inter-corporate loans continue to remain in force till section 186. of the Companies Act, 2013 is notified.
This issues with the approval of competent authority
Yours Faithfully,
(Kamna Sharma)
Assistant Director
it appeared to me that old section 295 is replaced by new sec 185.(loans to directors)
since new sec 186 is not yet notified,old sec 372A is allowed to be in operation.(intercorporate inv.etc…)
thnks &rgrds,
R.V.RAO
Its section 185, and not 186
Though MCA circular mentions that the sec 372A of the CA1956 continue to remain in force, Section 185 of ” 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:
…
…..
(e) 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 company.
Reading the above, pleas clarify whether the company can offer security/Guarantee in compliance with Section 372A.
It is also noted that the clarification by MCA- suggests that the Sec 185 is dealing with loans to directors and 372A deals with inter-corporate loans.
Please give your valid opinion