The explanation provided in section 372a of companies act, 1956 to the effect that loan includes debentures or any deposit of money made by one company. Section 372 in the companies act, 1956 indian kanoon. In terms of section 1801c of the companies act, 20, which has replaced section 293 of the companies act, 1956, the board of directors of a company, shall exercise the power to borrow money, where money to be borrowed, together with. Intercorporate loans, guarantee, deposits and investments when a company invest in the shares of other company, they give loan to other company and some time issues guarantee on their behalf, other than its ordinary course of business. An act to consolidate and amend the law relating to companies and certain other associations. The companies act, 20 passed by the parliament has received the assent of the president of india on 29th august, 20. Section 25 companies under companies act 1956 legal. The companies act, 20 has been notified in the official gazette on 30th august, 20 but the provisions of this act shall come into force on such dates as the central government may notify in the. Similarly, another type of company incorporated under the companies act, 1956 is section 25 companies. Section 186 of the companies act, 20 is yet to be notified. In the new act, many sections from the old act were amended among which one section 372a which dealt with inter corporate loan, investment, guarantee, and security. The name of the company hereinafter called the federation is the federation of indian mineral industries. Companies act, 1956 bare acts law library advocatekhoj. In this connection, it is hereby clarified that registers maintained by companies pursuant to subsection 5 of section 372a of companies act, 1956 may continue as per requirements under these provisions and the new format prescribed vide form mbp2 shall be used for particulars entered in such registers on and from 1.
Section 185 and 186 loans and investments by company. Clarification on section 372a of the companies act, 1956. Notice pursuant to section 192a of the companies act, 1956 read with. The section corresponds to sec 372a of the erstwhile companies act 1956 and therefore, it should only regulate intercorporate loans and not all loans. Powers of the board of directors of a company as per the. Section 372a has been enacted following the recommendation of the working group constituted by the govt. The companies act 20 came into force on 12th september 20 intending to ease business, streamline the compliance process and resolve various issues faced under companies act 1956. Appointment of directors 39 by the articles as regard first directors sec 254 by the company in general meetings sec 255,257,263,264 by the directors sec 260,262,3 by the third party sec 255 by the central government sec 408. In a jv company wherein the indian listed company is providing know how and in lieu of that the jv company is allotting shares of 25%. Definitions of company, existing company, private company and public company 4. Analysis of section 186 pursuant to companies act, 2017. Section 372a of the companies act, 1956, specifically exempts any loans made, any guarantee given or security provided or any investment made by a holding company to its wholly owned subsidiary.
This circular will apply till section 186 is notified, and if and when section 186 is notified, there will be again ambiguity as section 186 does not grant exemptions in holding and wholly owned subsidiary cases like section 372a does. All the four transactions are frequently taken place in any company and henceforth the section becomes more important and therefore it requires to special heed by virtue of strict penal provisions. There is no such condition in section 185 of companies act, 20 and section 372a of companies act, 1956. Section 25 companies in the companies act, 1956 advisory.
The mca vide its circular dated november 19, 20 has clarified that section 372a of the 1956 act dealing with intercorporate loans and investments, which inter alia exempts grant of loaninvestments by a holding companies to their wholly owned subsidiaries, shall continue in force until section 186 dealing with intercorporate loans and. Applicability of section 372a companies act 1956 abcaus. Major rules and regulations under the companies act, 1956. In which it has been clarified that section 372a,which deals with inter corporate loans remain effective till section 186 the. Mca has now clarified that sec 372a of the companies act 1956 dealing with.
Whether this will amount to investment under the provisions of section 372a of the companies act, 1956 for the listed company. Section 372a of the companies act,1956 corporate law forum. Mca has now clarified that sec 372a of the companies act 1956 dealing with intercorporate loans continues to remain in force till sec 186 of companies act 20 is notified. X x x x extracts x x x x b extracts may be taken therefrom and copies thereof may be required, by any member of the company to the same extent, in the same manner, and on payment of the same fees as in the case of the register of members of the company. Associations and partnerships to be registered as companies under act. The issue has been examined with reference to applicability of section.
Be it enacted by parliament in the sixth year of the republic of india as follows 1. Sec 25 companies can be either private public company having a limited liability. Various companies have been incorporated under the companies act, 1956. All the four transactions are frequently taken place in any company and henceforth the section becomes more important and therefore it requires to special heed by virtue of strict penal provisions and because of no much space to play. Section 372a of the companies act legal service india. Proposed amendments by clause 59 of the companies amendment bill, 2016 circular no. Section 372a of the ca 1956 was applicable only to public companies. Companies branch audit exemption rules, 1961 view download. Loan, guarantee, security, investment made vinod kothari.
The issue has been examined with reference to applicability of section 372a of the companies act, 1956 visavis section 185 of the companies act, 20. The company has not altered the provisions of the memorandum with respect to the situation of the companys registered of. There was no such provision in the erstwhile companies act 1956 see section 372a of companies act 1956. Section 372a inter corporate loaninvestmentguarantee. Lesson 16 intercorporate loans, investments, guarantees. The explanation provided in section 372a of companies act, 1956 to the effect that loan includes debentures or any deposit of money made by one company with another company, not being a banking company, is not provided in section 186. Copy of the special resolution passed by the shareholders of the company under section 372 a of the companies act, 1956 is attached herewith.
Section 372a of 1956 act covers only body corporate, whereas section 186 of the 20 act covers perons and body corporate. The curious case of section 4 7 of the companies act, 1956. Powers of tribunal to make suitable order on completion of inquiry424d. Full text containing the act, companies act, 1956, with all the sections, schedules, short title, enactment date, and footnotes. Board of india act, 1992 and covered under such class or classes of companies as may be. Section 186 of companies act, 20 loan and investment. Lesson 16 intercorporate loans, investments, guarantees and security 1 lesson outline. The issue has been examined with reference to applicability.
The word person has not been defined under the 20 act. Whereas section 185 of the companies act, 20 prohibits guarantee given or any security provided by a holding company in respect of any loan taken by its subsidiary company except in the ordinary course of business. Companies declaration of beneficial interest in shares rules, 1975 view download. Companies act 1956 section 227 citation 11158 bare act. The companies amendment act,1999 brought about a radical change in bringing into existence a combined provision in section 372a of the act, effective from 31. This an act to consolidate and amend the law relating to companies. Main provisions of companies act 1956 presented by. Companies acts section 185, 186 and 372a ambiguities. Mca clarification on applicability of section 372a of of. A company, whether by itself or together with its subsidiaries hereafter in this section and section 373 referred as the investing company, shall not be entitled to acquire, by way of subscription, purchase or otherwise whether by itself. Loan and investment by company companies act 20 section 186. The curious case of section 4 7 of the companies act, 1956 this issue is of paramount importance for foreign companies having majority shareholding in indian companies since classification as a. Group 1 aarti singh, azhar hussain, jyoti nawlani, nemchand meena, renuka sharma companies act.
Section 372a of the companies act, 1956 the act deals with intercorporate loan, investment, guarantee and securities in connection with loan. Comparison of section 186 of companies act, 20 and. Companies act, 1956 section 303 to 674 latest laws. All the four transactions are frequently taken place in any company and henceforth the section becomes more important and therefore it requires to special heed by virtue of strict penal provisions and. Where a company purchases its own shares out of free reserves, then a sum equal to the. Inquiry into working of sick industrial companiessections of companies act, 1956. Lesson 16 intercorporate loans, investments, guarantees and security 5 1862c of the act, 20. Companies act the companies act is a successor to the indian companies act of 19 and is a consolidation of many successive amendment acts, statutory rules and principles laid down in decisions of. Companies compliance certificate rules, 2001 view download. But section 25 companies are allowed to dispense with the use of term limited or private limited from their names sub sec. Mca clarification on applicability of section 372a of of companies. The companies act, 1956 memorandum of association of the federation of indian mineral industries new delhi limited by guarantee and not having a share capital name 1.