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INTERCORPORATE LOANS AND BORROWING

Home / INTERCORPORATE LOANS AND BORROWING

INTERCORPORATE LOANS AND BORROWING

WHILE EXCHANGING LOANS CORPORATE SHALL ADHERE TO FOLLOWING SECTION AND THE RULES MADE THEREUNDER
I Accepting Loan from other companies
In pursuance of Section 179 -Power of Boards of Companies Act 2013 every company shall pass a Board Resolution to borrow money

Further in pursuance of Sec 180 -Restrictions on Power of Board and amendment thereof

Any public company which borrow money and where the money to be borrowed, together with the money already borrowed by the company exceeds aggregate of its paid-up share capital and free reserves, than such company shall pass Special Resolution for such borrowing and file MGT -14 within 30 days of passing such resolution.


Further section 180 is not applicable upon private limited companies pursuant to notification dated 5th June, 2015.
II Granting Loan and Guarantee to Other Companies
  1. Section 185-Loan to directors read with Companies (Meetings Of board and its power) Rules 2014 and any amendment thereof
No company shall, directly or indirectly, advance any loan, including any loan represented by a book debt, any guarantee or provide any security in connection with any loan taken to any of its directors or to any other person in whom the director is interested
Explanation—For the purposes of this section, the expression “to any otherperson in whom director is interested” means—
  • a) any director of the lending company, or of a company which is its holding company or any partner or relative of any such director;
  • b) any firm in which any such director or relative is a partner;
  • c) any private company of which any such director is a director or member;
  • d) any body corporate at a general meeting of which not less than twenty five per cent. of the total voting power may be exercised or controlled by any such director, or by two or more such directors, together; or
  • 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.

As per the notification dated 5th June 2015above provisions shall not apply to a Private Company –
  • a. in whose share capital no other body corporate has invested any money;
  • b. if the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid up share capital or fifty crore rupees whichever is lower.; and
  • c. such a company has no default in repayment of such borrowings subsisting at the time of making transactions under this section.


As per Company Amendment Act 2013 dated 26th May 2015the provisions of Section 185 will not apply if

” any loan made by a holding company to its wholly owned subsidiary company or any guarantee given or security provided by a holding company in respect of any loan made to its wholly owned subsidiary company; or

any guarantee given or security provided by a holding company in respect of loan made by any bank or financial institution to its subsidiary company:

Provided that the loans made under clauses (c) and (d) are utilized by thesubsidiary company for its principal business activities.”.
  1. Section 186- Loan and investment by company.
If any company directly or indirectly —
(a) give any loan to any person or other body corporate;
(b) give any guarantee or provide security in connection with a loan to any other body corporate or person; and
(c) acquire by way of subscription, purchase or otherwise, the securities of any other body corporate,
And the same exceeds higher of the below
60% (Paid Up capital + Free Reserve+ Security Premium).
100% (Free Reserve+ Security Premium)
Than the company shall follow the following procedure
  1. Prior unanimous approval of Board
  2. Passing of Special Resolution
  3. File Form -MGT 14 with the registrar with 30 days of passing resolution
 
Conclusion: hope we have helped you to understand the concept of Inter corporate Loans and Borrowings. Still in case of any confusion, please feel free to contact us at complianceship@gmail.com or +91-8010233173 or visit our website www.complianceship.com
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