During a call with a startup client, we heard the term investor Nth time. “What is a need for investor or investment? It is a self-sufficient business plan.” These days no promoters of startup interested in sales and services but on investment pouring in. They even do not have a plan of servicing of investment which may pour in.
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According to Section 187 of the Companies Act 2013 discussed earlier here, all investments made or held by a company in any property, security or other asset shall be made and held by it in its own name.
The company may hold any shares in its subsidiary company in the name of any nominee or nominees of the company, if it is necessary to do so, to ensure that the number of members of the subsidiary company is not reduced below the statutory limit. [Proviso to Section 187(1)]
According to Section 185 of the Companies Act 2013, 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. We have discussed this Section earlier here.
Rule 10 of the Companies (Meetings of Board and its Powers) Rules 2014 exempt wholly owned subsidiary from the requirements of Section 185 when such loan is utilised for principal business activity of the subsidiary company.
Ministry of corporate Affairs has issued a General Circular on 14th February 2014. My readers can download this Circular from MCA site link here.
We have already discussed Section 185 in one of the earlier post here.
The Section under discussion basically says, 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.
Posted in Chapter XII - CA2013, Companies Act 2013
Tagged Companies Act 2013, Companies Bill 2012, CorpGov, CorpLaw, Corporate Governance, Corporate Law, Directors, Guarantee, India, Investment, Key managerial personnel, Legal Reforms, Loan, Loan to Directors, Ministry of corporate affairs, Reforms, Subsidiary Company
LOAN TO DIRECTORS, ETC. (SECTION 185):
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.
This provision shall not apply to –
Posted in Chapter XII - CA2013, Companies Act 2013
Tagged Companies Act 2013, Companies Bill 2012, CorpGov, CorpLaw, Corporate Governance, Corporate Law, Directors, India, Investment, Key managerial personnel, Legal Reforms, Loan, Loan to Directors, Ministry of corporate affairs, Reforms, Subsidiary Company
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