TOPIC 8: QUICK REFERENCE TO “Loan and Investment by the Company”

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Quick Reference to "Loan and Investment by the Company" :-
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Legal Provision:-
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Section 186 of Companies Act, 2013.
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Points:-
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1. It deals with loan given to any person , body corporate, Giving of guarantee in related with loan. Acquisition (Purchase) of Securities of Body Corporate.
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2. Limits:-
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Upto 60% of its paid up capital + Free reserves+ Securities Premium Account.
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OR
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Upto 100% of its free reserves + Securities Premium Account.
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Unanimous Board resolution in the Board meeting is required. Circular resolution is not allowed.
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3. The Special Resolution in the General meeting is required if It Crosses the above mentioned limit. ( Exempted for Govt . companies engaged in defence production)
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4. Disclosure should be made in financial statements (Section 186(4) of Companies Act, 2013).
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5. Approval of financial institution is not required if it's upto the limit ( Already mentioned Above).
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6. Separate Register should be maintained in Form MBP-2.
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7. Non-Apllicability:-
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# Banking Company
#NBFC
#Insurance Company
#Husing Finance Company
#Ordinary Business of Company as acquisition of Securities.
#Sale on Credit.
#Normal Trade Advances given to Suppliers.
#Investment in mutual fund ( Except UTI )
# Loan to Directors.
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8. Punishment for Contravention:-
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For Company:-
Min. ₹ 25 k Max ₹5 lakh.
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For Officer in default :-
Imprisonment maximum Term of 2 years or fine of Min. ₹25 k Max. ₹ 1 lakh or both.
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Regards
ACA SOURAV BAGARIA