Tag Archives: Loan to Directors

Principal Business Activities


Every company must be a business organization. Being business organization, a company has business activities. In the Companies Act, 2013 “principal business activities” is a major reporting requirement. According to Section 92(1)(a), every company shall prepare a return (hereinafter referred to as the annual return) in the prescribed form containing the particulars as they stood on the close of the financial year regarding its principal business activities. Section 185 as amended has reference to principal business activities as a major condition for a loan to directors and related concerns.

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Meetings of Board and its Power: Second Amendment Rules


Ministry of corporate Affairs issued a notification dated 14th December 2015 and published here in the Gazette of India dated 15th December 2015 regarding amendment in the Companies (Meetings of Board and its Power) Rules 2014.

The Companies (Meetings of Board and its Power) Second Amendment Rules, 2015 (i) inserts a new Rule 6A, (ii) omit present Rule 10 and (iii) amend present Rule 15(3).

We will discuss newly inserted Rule 6A in a future post. In this post we bill discuss other two amendments in very brief way.

Loan to Directors

We have discussed now omitted Rule 10 earlier here. These rules became redundant after the Company (Amendment) Act, 2015 as discussed earlier here. Hence, it is deleted.

Amendment in Rule 15

We have discussed Rule 15 earlier here. There is a minor but very important amendment in Rule 15(3). In rule 15, in sub-rule (3), for the words “special resolution”, wherever they occur, the word “resolution” shall be substituted.

This amendment is in line with the amendment in Section 188 by the Companies (Amendment) Act, 2015 discussed earlier here.

This has a very significant effect and dilutes corporate governance to certain level. This cut power of non – promoter investors whether they are indigenous investors or foreign investors.

Please note: This blog invite readers to share their comments, suggestions, hardship, queries and everything in comment section. This blog post is not a professional advice but just a knowledge sharing initiative for mutual discussion.

MCA Clarification on Section 185 (14 Feb 2014)


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.

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LOAN AND INVESTMENT


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 –

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