This article will help you to get to know about the provisions related to the loans to Director in accordance with the Companies Act 2013. Sec- 185 of Companies Act, 2013 deals with the provisions of loans to Director.
Loan to Director-
Section 185(1) of the Act states that a Company cannot –
1. To its Director
2. To the Directors of its Holding Company
3. To Relative of Directors
4. To the partner of the firm in which Director is a Partner
5. To the Partnership Firm in which its director or its Holding Company is a Partner
Loan to any Interested person of a Director- (Section 185(2))
Section 185(2) allows a company to give loans to any person/entity in whom any of the directors are interested in subject to certain conditions.
The Act provides the list of the persons who are considered as persons in whom any of the directors of the company is interested. They are-
Section 185(3) of the Act provides exceptions to the restrictions on the company to grant loans.
1. The Companies providing Loan to Managing Director/Whole Time Director subject to:As conditions of service extended to all its employees or
Pursuant to a scheme approved by Special Resolution
2. The Companies providing Loan, Guarantee, Security in their ordinary course of business where interest charged not less than prevailing yield of Govt. securities of 1 year, 3 year, 5 year or 10 year.
3. Loan, Guarantee Security provided by Holding Company to wholly-owned subsidiary company for principal business activities.
4. Guarantee or security provided by Holding Company to its subsidiary for principal business activities.
Any officer in default-
Recipient of the Loan-
Disclaimer: Though full efforts have been made to state the interpretations correctly, yet the author is not responsible / liable for any loss or damage caused to anyone due to any mistake / error / omissions
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