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9/9/2014 1:12 AM
 
JAILENDRA KUMAR SHUKLA
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Joined: 8/25/2012
Posts: 3
Loan by subsidiary company 

Dear All,

Please give me suggestion on the following companies act issue with respect to-

"Can a Subsidiary company (private limited) give loan or provide guarantee to its holding company (private limited) as per the Section 185 of the Companies act 2013."

 
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9/11/2014 12:01 PM
 
SAHIL VIJ
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Joined: 5/24/2014
Posts: 1
Re: Loan by subsidiary company 

If directors are common holding not less than 25% of voting power then loan given by holding to subsidiary attracts Section 185. In the given case it is asked if Subsidiary can give loan to Holding in respect of section 185.

My opinion would be YES, section 185 is attracted, loan can't be granted.

Reason :- Section- 185 says if company( it can be holding or subsidiary) grants loan or advance Directly or indirectly to Company( it can be holding or subsidiary) in whom director is interested i.e. holding not less than 25% of total voting rights in general meeting). Hence, Section 185 is attracted when holding company grants loan to subsidiary company.

 
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9/11/2014 8:35 PM
 
JAILENDRA KUMAR SHUKLA
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Joined: 8/25/2012
Posts: 3
Re: Loan by subsidiary company 

Dear,

I'm agree with your answer, but in general practice the subsidiary company provide a corporate guarantee to its holding company by way to mortgage its property to bank. In this case will this arrangement treated under section 185? (because numbers of company doing this arrangement for taking loan form bank and giving Corporate Guarantee of its subsidiary).

As per the Rule 10 of Companies (Meetings of Board and its Powers) Rule 2014, Holding Company will give loan and provide Corporate guarantee to its subsidiary company but no where in the Rule and Companies Act mention the "subsidiary company give loan or guarantee to holding company".


 
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