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    1.give To Any Person OR Body Corporate NO: Loans & Investments by Companies Section 186

    Uploaded by

    Harssh Pandey
    1. Section 186 of the Companies Act 2013 governs loans, investments, guarantees, and security provided by companies. It specifies limits on the amount that can be provided to other entities without shareholder approval. 2. The section prohibits companies from providing loans, guarantees or security that exceed 60% of paid-up capital, free reserves, and securities premium or 100% of free reserves and securities premium, whichever is higher. 3. It also specifies that loans cannot be provided below prevailing government security interest rates and certain disclosures must be made in financial statements. Contraventions are punishable by fines and imprisonment.

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    © All Rights Reserved
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    1.give To Any Person OR Body Corporate NO: Loans & Investments by Companies Section 186

    Uploaded by

    Harssh Pandey
    27 views10 pages
    1. Section 186 of the Companies Act 2013 governs loans, investments, guarantees, and security provided by companies. It specifies limits on the amount that can be provided to other entities without shareholder approval. 2. The section prohibits companies from providing loans, guarantees or security that exceed 60% of paid-up capital, free reserves, and securities premium or 100% of free reserves and securities premium, whichever is higher. 3. It also specifies that loans cannot be provided below prevailing government security interest rates and certain disclosures must be made in financial statements. Contraventions are punishable by fines and imprisonment.

    Original Description:

    intercorporate loans

    Original Title

    186

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    1. Section 186 of the Companies Act 2013 governs loans, investments, guarantees, and security provided by companies. It specifies limits on the amount that can be provided to other entities without shareholder approval. 2. The section prohibits companies from providing loans, guarantees or security that exceed 60% of paid-up capital, free reserves, and securities premium or 100% of free reserves and securities premium, whichever is higher. 3. It also specifies that loans cannot be provided below prevailing government security interest rates and certain disclosures must be made in financial statements. Contraventions are punishable by fines and imprisonment.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    27 views10 pages

    1.give To Any Person OR Body Corporate NO: Loans & Investments by Companies Section 186

    Uploaded by

    Harssh Pandey
    1. Section 186 of the Companies Act 2013 governs loans, investments, guarantees, and security provided by companies. It specifies limits on the amount that can be provided to other entities without shareholder approval. 2. The section prohibits companies from providing loans, guarantees or security that exceed 60% of paid-up capital, free reserves, and securities premium or 100% of free reserves and securities premium, whichever is higher. 3. It also specifies that loans cannot be provided below prevailing government security interest rates and certain disclosures must be made in financial statements. Contraventions are punishable by fines and imprisonment.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 10

    LOANS &

    INVESTMENTS
    BY COMPANIES
    Section 186
    NO
    Investments
    through
    more than two
    layers
    of Investment
    60% of Co.

    1.Give loan to any person OR body


    corporate
    2. Give guarantee or provide security in
    connection with
    loan

    Upt
    3. Purchase
    subscription,
    purchase securities
    Higher
    of
    o

    100% of

    Paid up Capital
    (+) Free Reserves
    (+) Security
    Premium

    OR

    Free reserves
    (+) Security
    Premium

    Section 186 Inter- Corporate Loans &


    Advances

    Section 186 (1)


    A Company can not make investment through not more than
    two layers of Investment Companies unless

    Exceptions:
    (i) a company from acquiring any other company
    incorporated in a country outside India if such other
    company has investment subsidiaries beyond two
    layers as per the laws of such country;
    (ii) a subsidiary company from having any investment
    subsidiary for the purposes of meeting the
    requirements under any law or under any rule or
    2

    186(2) INTERCORPORATE LOANS


    No company shall directly or indirectly
    (a) give any loan to any person or other body
    corporate;
    (b) give any guarantee or provide security in
    connection with a loan to any other body
    corporate or person; and
    (c) acquire by way of subscription, purchase or
    otherwise,
    Exceeding: the securities of any other body
    corporate
    i. 60% of its paid-up share capital, free
    reserves and securities premium account;
    or
    ii. 100% of its free reserves and
    securities premium account;
    whichever is more

    If exceeds the limits specified, prior


    approval by means of a:
    i. special resolution
    ii. passed at a general meeting shall be
    necessary
    Disclosure requirements:
    The company to disclose to the
    members:
    i.
    in the financial statement
    ii. the full particulars of the
    loans/investments/guarantee/securit
    y and
    iii. the purpose for which the same
    is proposed to be utilized by the

    TO ISSUE FINANCIAL
    STATEMENTS

    No company, which is registered


    under section 12 of the Securities and
    Exchange Board of India Act, 1992
    and covered under such class or
    classes of companies as may be
    prescribed, shall take inter-corporate
    loan or deposits exceeding the
    prescribed limit and such company
    shall furnish in its financial statement
    the details of the loan or deposits

    Section 187(5)
    No investment or loan etc. to be made:
    i. unless the resolution sanctioning it is passed
    at a meeting of the Board
    ii. with the consent of all the directors present
    at the meeting and
    iii. the prior approval of the public financial
    institution concerned where any term loan is
    subsisting

    Section 186(7)
    No loan shall be given under this section at a
    rate of interest:
    i. lower than the prevailing yield of 1 year, 3
    year, 5 year or 10 year Government Security
    closest to the tenor of the loan

    No loan/investment etc. can be


    made if:
    i. It is in default in repayment of
    any deposits accepted before or
    after the commencement of this
    Act; or
    ii. Has defaulted in payment of
    interest thereon;
    Till the defaults are subsisting

    Register of LOAN
    GUARANTEE AND
    SECURITIES
    Every company while giving loans ,
    guarantee shall keep a register which
    shall contain the particulars.
    (b) extracts may be taken therefrom by any
    To keep register at the registered office
    member,
    of the company and
    (a)
    openmay
    for inspection
    and shall
    copiesbe
    thereof
    be furnishedat
    to such
    any
    office ; and

    member ofthe company on payment of fees as


    prescribed in theArticles not exceeding Rs. 10
    per page.

    EXCEPTIONS
    Nothing contained in this section, except sub-section
    (1), shall apply

    To a loan/guarantee/security made by:


    i. a banking company; or
    ii. an insurance company; or
    iii. a housing finance company
    in the ordinary course of its business;
    or
    a company engaged in the business of
    financing of companies or of providing
    Nothing shall apply to any acquisition:
    infrastructural
    facilities
    (i) made by a NBFC
    registered under Chapter IIIB
    of the Reserve Bank of India Act, 1934 and whose
    principal business is acquisition of securities:
    Provided that exemption to non-banking
    financial company shall be in respect of its
    investment and lending activities;
    (ii) made by a company whose principal business
    is the acquisition of securities;

    CONTRAVENTION Section 372A of


    Companies Act 1956

    Section 186 of
    Companies Act 2013

    For
    Company

    Up to fifty thousand

    Minimum Rs.25,000
    Maximum Rs.5 lacs

    For every
    officer

    Up to fifty thousand
    Minimum Rs.25,000
    Or
    Maximum Rs.1 lacs
    Imprisonment up to two
    years
    and
    Imprisonment up to Two
    Years

    10

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