LOAN TO GROUP COMPANIES

Atlast finally, its a relief to Private companies. But though not an big relief.

Section 185 of the Companies Act 2013 shall not apply to private companies if

- not an subsidiary of public company

- no other body corporate was the shareholder of the company

- 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.

- such a company has not defaulted in repayment of any borrowings subsisting at the time of making transactions under this section.

So now!!! the private companies satisfying all the above conditions can lend money or give guarantee / security to Group Companies.

However the existing borrowings limit of 2 lacs is very low considering that many small companies have share capital of minimum 1 lacs. I dont get understand why don't the "Free Reserves" were not included for the calculation.

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