{"id":3244,"date":"2019-12-25T17:54:24","date_gmt":"2019-12-25T12:24:24","guid":{"rendered":"https:\/\/aktassociates.com\/blog\/?p=3244"},"modified":"2019-12-25T17:54:24","modified_gmt":"2019-12-25T12:24:24","slug":"intercorporate-loans-in-section-185-and-186","status":"publish","type":"post","link":"https:\/\/aktassociates.com\/blog\/intercorporate-loans-in-section-185-and-186\/","title":{"rendered":"Amended Portion of Intercorporate Loans In Section 185 and 186"},"content":{"rendered":"

Understanding of Amended Legal Position of Intercorporate Loans as per section 185 and Section 186 of companies act, 2013 in a simple language.<\/p>\n

\"Inter<\/p>\n

Introduction<\/b><\/h3>\n

If you have started reading this article then you already know that section 185 and 186 deals with loan to director and inter-corporate loans and investment, but before explaining the changes in these section in detail, let me tell that why do we need this section, because to become a professional, it is not only to know the provision but also necessary to have the knowledge regarding the reason for such provision. So, let\u2019s begin.<\/span><\/p>\n

Every company needs the funds to carry out its operating activities and for this, they can use their own capital or take loans from other entities or banks. Although, there is one more important source of fund used by the company, is Inter-corporate loans and investments. However it is seen in many instances that the company took the loan for their operating use but it further gives a loan to director or its relative without any interest and they use it for their own personal purpose and when company becomes unable to repay the loan amount to banks, it becomes the bankrupt and the ultimate loss have to be bear by the innocent shareholders.\u00a0<\/span><\/p>\n

Hence, the Companies Act, 2013 has provided us the specific provisions for providing loans to directors and companies in which directors are interested. Also, it gives guidance on loans, securities, and guarantees given to subsidiary companies. Companies can also make investments in other entities up to specific limits as prescribed in Section 186 of the 2013 Act.<\/a><\/span><\/p>\n

Section 185: Restriction on loans to the directors of a company\u00a0<\/b><\/h3>\n

Recently there is a major amendment made in section 185 of the companies act. Almost the whole section has been changed. So, if you have already known the old provision of this section, then it would not be difficult for you to understand this section.<\/span><\/p>\n

As per section 185 of companies act,\u00a0<\/span><\/p>\n