Ministry of Corporate Affairs on 10th March 2015 came out with a general circular 04/2015 regarding clarification with regard to Section 185 and 186 of the Companies Act 2013 on subject of loan and advances to employees.
The ministry say in circular:
“This Ministry has received a number of references seeking clarification on the applicability of provisions of section 186 of the Companies Act, 2013 relating to grant of loans and advances by Companies to their employees.”
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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