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    Inter Corporate Loan - Wos

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    ABHAY Raj
    Section 185 of the Companies Act 2013 regulates inter-corporate loans between companies. It prohibits a company from providing loans or guarantees to its directors and companies where its directors have interest, unless approved by shareholders. The Companies Amendment Act 2017 substituted Section 185 to remove ambiguities and bring clarity. It makes the provisions partly restrictive and partly prohibitive, and extends penal provisions. A company must follow various conditions like holding board meetings, shareholder approvals, and limits on amounts when providing inter-corporate loans.

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    Inter Corporate Loan - Wos

    Uploaded by

    ABHAY Raj
    85 views6 pages
    Section 185 of the Companies Act 2013 regulates inter-corporate loans between companies. It prohibits a company from providing loans or guarantees to its directors and companies where its directors have interest, unless approved by shareholders. The Companies Amendment Act 2017 substituted Section 185 to remove ambiguities and bring clarity. It makes the provisions partly restrictive and partly prohibitive, and extends penal provisions. A company must follow various conditions like holding board meetings, shareholder approvals, and limits on amounts when providing inter-corporate loans.

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    _Corporate_II_(ppt)[1]

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    Section 185 of the Companies Act 2013 regulates inter-corporate loans between companies. It prohibits a company from providing loans or guarantees to its directors and companies where its directors have interest, unless approved by shareholders. The Companies Amendment Act 2017 substituted Section 185 to remove ambiguities and bring clarity. It makes the provisions partly restrictive and partly prohibitive, and extends penal provisions. A company must follow various conditions like holding board meetings, shareholder approvals, and limits on amounts when providing inter-corporate loans.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    85 views6 pages

    Inter Corporate Loan - Wos

    Uploaded by

    ABHAY Raj
    Section 185 of the Companies Act 2013 regulates inter-corporate loans between companies. It prohibits a company from providing loans or guarantees to its directors and companies where its directors have interest, unless approved by shareholders. The Companies Amendment Act 2017 substituted Section 185 to remove ambiguities and bring clarity. It makes the provisions partly restrictive and partly prohibitive, and extends penal provisions. A company must follow various conditions like holding board meetings, shareholder approvals, and limits on amounts when providing inter-corporate loans.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 6

    “ INTER CORPORATE LOAN - WOS ”

    Submitted to:- Mrs. Nandita S. jha

    Submitted by :- Sonu Kumar

    Roll :- 1856

    Course:- B.B.A.,LL.B.(Hons.)

    Session :- 2017-2022

    Semester- 8th
    INTRODUCTION
     
     A company in its early stage receives investment from the angel investors and venture Capitalists
    (VCs), and subsequently from the Private Equity (PE) investors. And in the later stages of growth,
    the company borrows money from the banks and financial institutions.
     However, there might be certain situations in which the companies cannot borrow money from the
    banks or financial institutions, for example, due to some statutory or regulatory restrictions on the
    borrowing limit, or on the purpose for which the money is proposed to be borrowed. In such
    circumstances, the company can choose to borrow money from other companies in the shape of
    inter-corporate loans. This is an attractive option, especially as the rate of interest is also
    comparatively quite lower than that charged by the banks or other financial institutions.
     However, one must bear in mind that the inter-corporate borrowing is highly regulated. There are a
    lot of restrictions and prohibitions on the power of one company to lend money to the other
    company. Therefore, it becomes imperative to understand the provisions of inter-corporate
    borrowings. Inter-corporate loans and investments are important sources of funds for every
    company. The 2013 Act contains stringent provisions for providing loans to directors and companies
    in which directors are interested. Additionally, it provides guidance on loans, securities, and
    guarantees given to subsidiaries. Companies can also make investments in other entities as per
    Section 186 of the 2013 Act.
     The Companies (Amendment) Act, 2017, which got the President’s assent on January 03, 2018,
    substituted the erstwhile Section 185 of the Companies Act, 2013 (“Act”) with a completely new
    section. The amended Section 185 of the Act relates to the provision of the advancement of loan to
    the directors and persons related to the directors. 
    Provision Regarding Inter Corporate Loan as

    per Companies act ,2013


     Inter-corporate loans and investments are important sources of funds for every company. The
    2013 Act contains stringent provisions for providing loans to directors and companies in which
    directors are interested. Additionally, it provides guidance on loans, securities, and guarantees
    given to subsidiaries. Companies can also make investments in other entities as per Section 186 of
    the 2013 Act.
     
     PROVISIONS OF SECTION 185 clause 1,2,3,4.
     
     It states that, no Company shall, directly or indirectly, advance any loan (including book debt) or
    give any guarantee or provide any security in connection with any loan taken by:
     Prohibits providing of loan or guarantee or security to the below mentioned individuals and firms-
     as per Sec 185 (1), Company Can not give any loan/guarantee/security to above mentioned
    individuals and firms.
     PROVISIONS OF SECTION 185(2):
     
     It states that a Company can advance any loan (including book debt) or give any guarantee or
    provide any security in connection with any loan taken by any person in whom any of Director of
    the Company is interested subject to the conditions:
     
    Provision As Per Companies Amendment Act,
    2017:-
     Companies (Amendment) Act, 2017 brings relief under sections 185 and 186

     Section 185 of Companies Act, 2013 has been completely substituted by New Section 185
    under Companies (Amendment) Act, 2017 (CA, 2017 got president assent on 3rd January, 2018.
    Due to Complete substitution there are many changes under this section .
     The intent behind bringing the amendment in Companies Act, 2013 is to clear the ambiguities in
    the current provisions in order to strengthen the corporate governance and to help improve ease of
    doing business in the country. Therefore, in order to remove the ambiguities and to bring clarity,
    the Companies (Amendment) Bill, 2017 which was passed by Rajya Sabha on December 19, 2017
    and received the assent of the President on January 01, 2018, has brought many changes. Among
    the various changes, the present Article deals with the changes brought under the sections 185 and
    186 of the Companies Act, 2013.
     Changes in section 185.
     Deletion of the non obstante clause.
     The new provisions of section 185 is partly restrictive and partly prohibitive
     Extension of the penal provisions.
    Process of giving loan under sec- 185

     Holding of Board Meeting.

     If Lender Company is Public Company then file the Board


    Resolution in e-form MGT-14 with Roc with in 30 days from the date
    of Board Meeting.
      Conveining of General Meeting.
     Other Conditions to be fulfiled.
      Declaraiton from Brorrower.
      Limits of L/G/S u/s 186(2).
     Approval of Public Financial Institution.
     Interest on Loan u/s 186 (7).
    CONCLUSION

     Thus, we can say that Section 185 framed in such a way to safeguard the
    interest of shareholders by imposing some prohibition in respect of loan or
    guarantee or security given by Company while on the other side it is also
    providing some relaxation and exemptions for ease of doing business.
     Inter-corporate loans and investments are important sources of funds for
    every company. The 2013 Act contains stringent provisions for providing
    loans to directors and companies in which directors are interested.
    Additionally, it provides guidance on loans, securities, and guarantees
    given to subsidiaries. Companies can also make investments in other
    entities as per Section 186 of the 2013 Act.
     However, one must bear in mind that the inter-corporate borrowing is
    highly regulated. There are a lot of restrictions and prohibitions on the
    power of one company to lend money to the other company. Therefore, it
    becomes imperative to understand the provisions of inter-corporate
    borrowings
     

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