st 1. Certain loans, guarantees and securities prohibited [Section 185(1)] ‘No company shall, directly or indirectly — (a) advarice any loan, including any Joan represented by a book debt, to ~ Vy “Bdirector of the lending company or of a company which is its holding company: or \Gi) a relative of any such director; or \Giii) a partner of any such director; or iy) a firm in which any such director or relative ig a partner, Jo ©» (b) give any guarantee in connection Joan taken by — @ 2 director of the lending company or of a company which is its holding company: or (fid- a elative of any such director: orMeetings of Board and its Powers 2.69 4 partner of any such director; or 4) firm in which any such director or relative isa partner, (6) provide any security in comneetion with a foan taken by ~ Ada diréctor oF the Tending company or of a company which is its holding company; oF “ii)_a relative of any such director; or {lii)_a partner of any such director; or (iy) a firm in which any such director or relative is partner, 2. Certain loans, guarantees and securities permitted only upon fulfilment of certain conditions [Section 185(2)] (gp-Permited transactions. A company may — “G)_ advance any_Joan, including any loun represented by a book, debt, to any person in whom any of the lt zr pers fom any of director of the company is interested; ot ii) give any guarantee in connection with any loan taken by any person in whom any of the director of the company is interested: or aici {iii provide any security in connection with any loan taken by any person in whom any’ of the director of the company is interested, Pre enaiions. Te above transactions shall be permitted only if the following conditions are satisfied: (ATA special reso passed by the company in general meeting, Li)” The explanaiory statement annexed to the notice of the general meeting shall disclose ~ \-Tull particulars of the loans to be given, or guarantee to be given or security to be provided; \ 2 the nurpose for which.the loan or guarantee or security is proposed to be utilised by the recipient of the loan or guarantee or security; \ any other relevant fact. ity The loans.ate-utilised by the borrower for its principal business activities. ‘The expression ‘any person in whom any ofthe director of the company i inforasted’ means = |..2%@ private company of which any such drector isa director or member. LAMY @ body corporate a a general mesting of which 26% o more oll voting power ay be exorcised or conta by any such director, or by two or more such directors together. (c) a body corporate, the Board of directors or managing director or manager whereof Is accustomed to act in accordance with the directions or instructions ofthe Board or any crecor ofthe lending company. 3. Non-applieability of section 185 [Section 185(3)| ‘The provisions contained in section 185(1) and 185(2) shall not apply in the following a igns.conmlnedia ———ee © (a) Where aus TD/ ND L/-€1) Ioan is given, to a managing director or whole-time director ss Cusioay Provided to all the employees. (>) Where Ubi loan is given toa 9 “Gii) such loqn is given pursuantio.any-scheme ap are; Srenr or and ay tone gen there is no prohibition or restriction on such los errtere - (i) @ company,.in the ordinary course, of “@ duerepayment of any loan; and (ii) in respect of such loans, an Jnterest ‘ears, 5 years or 10 years Gove ae= Textbook by CA CS Munt Se A reboot by GA CS Mu Wier tan is glven by a banking company to any parton species re Year Sov any Se Charged inne avon by a Bann omring yn of yaar. 3yo@rs, SYA cay banking COMPANY Gives inane {enof of tho toan, the provelone of woction 185(1) and (2) a7@ NO! At A, Financial Company (NBFC) oF _ {anor of te oan the provlone of secton, ESE An ivan by any Now-bankn 951) and 2) 8h Company, which In the ordinary course of ts business 0 tne rato of itorost charged NOt le than Frauen etch he odnary couenary cours ot ousinoas an INT te tanorof the lean a Of provating yaar your, 8 year, yonrs ot 10 yeara Goverment saoUTty 20% M UO Where — © loans made-by # holding company tots wholly owned subsidinnt Ci clvitis. Gi) such loan isto be utilised by such subsidiary company. For is principal business activities. (Where 4 (i) any guarantee is given or security is provided by a holding com wholly owned subsidiary company; and Gi) such loan 1576 be utilised by ‘ah ‘subsidiary company for is principal business a () Where — (Hany guarantee is given or security is provided by subsidiary company, (ii) such loan is made by any bank or financial in: (iii) such loan is to be utilised by such subsidiary company 4. Effects of contravention of section 1) or 185(2) [Section 185(4)| (a) The company shall be punishable with fine which shall not be les than RS lakh but which may extendia 25 lak : (b) Every officer of the company who is in default shall be punishable with imprisonment upto. 6 months.or wit fine which shall not be less than Rs, 5 lakh but which may extend to Rs. 25 lakh (6) The dirgctor-or-the-other person.10-whom-loan-has beep given, oF Tor whom the guarantee has been given security has been provided, in contravention of section 185, shall be punishable.svith imprisonment uia6 months or with fine which shall not be less than Rs, $ kh but which may extend fo Rs. 25 Joh. oe with both Exemptions to certain private companies and Government companias ) As per Noilicalion No, G.S.R. 484(E) dated Sth June, 2016, the provisions of section 186 shall noLapely © a BAY ‘company ~ in whose share capital no other_body corporate has invested any money! (i) f the borrowings. of such.a.company from banks oF nancial inst F any body corporate Is fess than twice <8 ‘paid up share, capital or Re, 60 crore, whichever Is lower; ne )) no default in repayment of such borrowings is subsisting att! {thas not committed any. under section 92. ‘As per Notification No, Gs ‘company it~ pany in respect of any Toan made jy «holding company in respect of any Loan made to jy