{"id":80845,"date":"2023-11-21T12:49:09","date_gmt":"2023-11-21T07:19:09","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?post_type=act&#038;p=80845"},"modified":"2023-11-21T12:49:11","modified_gmt":"2023-11-21T07:19:11","slug":"section-185","status":"publish","type":"act","link":"https:\/\/enterslice.com\/learning\/act\/companies-act-2013\/section-185\/","title":{"rendered":"Section 185. Loan To Directors, Etc"},"content":{"rendered":"\n<p><strong><span id='easy-footnote-1-80845' class='easy-footnote-margin-adjust'><\/span><span class='easy-footnote'><a href='https:\/\/enterslice.com\/learning\/act\/companies-act-2013\/section-185\/#easy-footnote-bottom-1-80845' title='Subs. by s. 61, ibid., for section 185 (w.e.f. 7-5-2018).'><sup>1<\/sup><\/a><\/span>[185. Loans to directors, etc.<\/strong>&#8212; (1) No company shall, directly or indirectly, advance any loan, including any loan represented by a book debt to, or give any guarantee or provide any security in connection with any loan taken by,&#8211;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(a) any director of company, or of a company which is its holding company or any partner or relative of any such director; or<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(b) any firm in which any such director or relative is a partner.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(2) A company may advance any loan including any loan represented by a book debt, or give any guarantee or provide any security in connection with any loan taken by any person in whom any of the director of the company is interested, subject to the condition that&#8211;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(a) a special resolution is passed by the company in general meeting:<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>Provided that the explanatory statement to the notice for the relevant general meeting shall disclose the full particulars of the loans given, or guarantee given or security provided and the purpose for which the loan or guarantee or security is proposed to be utilised by the recipient of the loan or guarantee or security and any other relevant fact; and<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(b) the loans are utilised by the borrowing company for its principal business activities.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><em>Explanation.<\/em>&#8212; For the purposes of this sub-section, the expression &#8220;any person in whom any of the director of the company is interested&#8221; means&#8211;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(a) any private company of which any such director is a director or member;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(b) 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<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(c) 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.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(3) Nothing contained in sub-sections (1) and (2) shall apply to&#8211;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(a) the giving of any loan to a managing or whole-time director&#8211;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(i) as a part of the conditions of service extended by the company to all its employees; or<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(ii) pursuant to any scheme approved by the members by a special resolution; or<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(b) a company which in the ordinary course of its business provides loans or gives guarantees or securities for the due repayment of any loan and in respect of such loans an interest is charged at a rate not less than the rate of prevailing yield of one year, three years, five years or ten years Government security closest to the tenor of the loan; or<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(c) 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<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(d) 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:<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>Provided that the loans made under clauses (c) and (d) are utilised by the subsidiary company for its principal business activities.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(4) If any loan is advanced or a guarantee or security is given or provided or utilised in contravention of the provisions of this section,&#8211;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(i) the company shall be punishable with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(ii) every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees; and<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>(iii) the director or the other person to whom any loan is advanced or guarantee or security is given or provided in connection with any loan taken by him or the other person, shall be punishable with imprisonment which may extend to six months or with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees, or with both.]<\/p>\n","protected":false},"excerpt":{"rendered":"<p>[185. Loans to directors, etc.&#8212; (1) No company shall, directly or indirectly, advance any loan, including any loan represented by a book debt to, or give any guarantee or provide any security in connection with any loan taken by,&#8211; (a) any director of company, or of a company which is its holding company or any [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":79763,"parent":79755,"menu_order":0,"template":"","format":"standard","meta":[],"categories":[11445],"tags":[1007],"acf":{"service_id":"215"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v14.6.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Section 185. Loan To Directors, Etc - Enterslice<\/title>\n<meta name=\"description\" content=\"Explore Section 185: Loan to Directors, a critical aspect of corporate governance. 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