{"id":2198,"date":"2022-02-08T10:45:35","date_gmt":"2022-02-08T10:45:35","guid":{"rendered":"https:\/\/www.akgvg.com\/blog\/?p=2198"},"modified":"2022-02-08T10:45:35","modified_gmt":"2022-02-08T10:45:35","slug":"section-185-and-186-of-the-companies-act2013-related-to-loans-to-employees","status":"publish","type":"post","link":"https:\/\/www.akgvg.com\/blog\/section-185-and-186-of-the-companies-act2013-related-to-loans-to-employees\/","title":{"rendered":"Section 185 and 186 of the companies Act,2013 related to loans to employees"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-2199\" src=\"https:\/\/www.akgvg.com\/blog\/wp-content\/uploads\/2022\/02\/Section-185-and-186-of-the-companies-Act2013-related-to-loans-to-employees.jpeg\" alt=\"Section 185 and 186 of the companies Act,2013 related to loans to employees\" width=\"1000\" height=\"1000\" srcset=\"https:\/\/www.akgvg.com\/blog\/wp-content\/uploads\/2022\/02\/Section-185-and-186-of-the-companies-Act2013-related-to-loans-to-employees.jpeg 1000w, https:\/\/www.akgvg.com\/blog\/wp-content\/uploads\/2022\/02\/Section-185-and-186-of-the-companies-Act2013-related-to-loans-to-employees-300x300.jpeg 300w, https:\/\/www.akgvg.com\/blog\/wp-content\/uploads\/2022\/02\/Section-185-and-186-of-the-companies-Act2013-related-to-loans-to-employees-150x150.jpeg 150w, https:\/\/www.akgvg.com\/blog\/wp-content\/uploads\/2022\/02\/Section-185-and-186-of-the-companies-Act2013-related-to-loans-to-employees-768x768.jpeg 768w, https:\/\/www.akgvg.com\/blog\/wp-content\/uploads\/2022\/02\/Section-185-and-186-of-the-companies-Act2013-related-to-loans-to-employees-230x230.jpeg 230w\" sizes=\"auto, (max-width: 1000px) 100vw, 1000px\" \/><\/p>\n<p style=\"text-align: justify;\">According to <strong>Section 185<\/strong>of the Companies Act, 2013 read with the <strong>Companies (Amendment) Act,2017<\/strong>, Effective from 7th May 2018, a company shall not provide any loan, guarantee, or security-related to any loan taken by\u2014<\/p>\n<ol style=\"text-align: justify;\">\n<li>any director of the <strong>company<\/strong>, or<\/li>\n<li>any director ofa company which is its <strong>holding company<\/strong> or<\/li>\n<li>any partner or relative of any such director mentioned above or<\/li>\n<li>any <strong>firm<\/strong> in which any such director or relative is a partner<\/li>\n<\/ol>\n<p style=\"text-align: justify;\">However, a company can give any loan, guarantee, or security-related to any loan taken to any person in whom any director of the company is interested, only after complying with the two conditions mentioned below:<\/p>\n<ul style=\"text-align: justify;\">\n<li>Passed a <strong>special resolution<\/strong> in a general meeting of the company, and<\/li>\n<li>The loans so taken must be<strong>utilized<\/strong> by the borrowing company for its <strong>principal business activities.<\/strong><\/li>\n<\/ul>\n<p style=\"text-align: justify;\">Allthe provisions mentioned above shall not apply to:<\/p>\n<ul style=\"text-align: justify;\">\n<li>giving of any loan to a managing or whole-time director\u2014<\/li>\n<\/ul>\n<ol style=\"text-align: justify;\">\n<li><strong><u>as a part of the conditions of service extended by the company to all its employees<\/u><\/strong>, or<\/li>\n<li>as per any scheme approved by passing a special resolution<\/li>\n<\/ol>\n<p style=\"text-align: justify;\">According to<strong>Section 186<\/strong> of the Companies Act,2013, A company shall not \u2014<\/p>\n<ol style=\"text-align: justify;\">\n<li>provide any loan to <strong>ANY PERSON<\/strong>or other <strong>body corporate<\/strong><\/li>\n<li>provide any guarantee or security related to a loan to any other body corporate or<\/li>\n<\/ol>\n<p style=\"text-align: justify;\">person and<\/p>\n<ol style=\"text-align: justify;\" start=\"3\">\n<li>acquire the securities of any other body corporate throughpurchase, subscription, or otherwise<\/li>\n<\/ol>\n<p style=\"text-align: justify;\"><strong>exceeds 60%<\/strong> of its paid-up share capital, free reserves, and securities premium account<strong>(PSC+FR+SPA)<\/strong> or <strong>100%<\/strong> of its free reserves and securities premium account<strong>(FR+SPA)<\/strong>, whichever is higher.<\/p>\n<p style=\"text-align: justify;\"><strong>Clarification <\/strong>on the word<strong>\u201cANY PERSON\u201d<\/strong>, as per the Companies (Amendment)Act,2017- Effective from 7th May 2018,the word &#8220;person&#8221; <strong><u>does not include any individual who is in the employment of the company.<\/u><\/strong><\/p>\n<p style=\"text-align: justify;\"><strong><u>CONCLUSION<\/u><\/strong><strong>:-<\/strong>Dear stakeholders afterreadingall above the provisions we can saythe company may giveloans and advance to its employees by complying with <strong>SECTION 185<\/strong>and other incidental matters theretonot<strong> section 186<\/strong>of the companies act,2013.<\/p>\n<p style=\"text-align: justify;\">This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. <a href=\"https:\/\/www.akgvg.com\/\" target=\"_blank\" rel=\"noopener noreferrer\"><strong>AKGVG &amp; Associates<\/strong><\/a> does not intend to advertise its services through this.<\/p>\n<p style=\"text-align: justify;\">Posted by:<\/p>\n<p style=\"text-align: justify;\">CS Neetu Saini<\/p>\n<p style=\"text-align: justify;\">AKGVG &amp; Associates<\/p>\n","protected":false},"excerpt":{"rendered":"<p>According to Section 185of the Companies Act, 2013 read with the Companies (Amendment) Act,2017, Effective from 7th May 2018, a company shall not provide any loan, guarantee, or security-related to any loan taken by\u2014 any director of the company, or any director ofa company which is its holding company or any partner or relative of&#8230;<\/p>\n","protected":false},"author":1,"featured_media":2199,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[120],"tags":[479],"class_list":["post-2198","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-secretarial-services","tag-secretarial"],"_links":{"self":[{"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/posts\/2198","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/comments?post=2198"}],"version-history":[{"count":1,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/posts\/2198\/revisions"}],"predecessor-version":[{"id":2200,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/posts\/2198\/revisions\/2200"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/media\/2199"}],"wp:attachment":[{"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/media?parent=2198"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/categories?post=2198"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/tags?post=2198"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}