Section 185 of companies act 2013 prohibits any loans or guaranty by company to Directors and related parties.

Earlier these provisions were not applicable to private limited companies (Companies Act 1956), but after applicability of Companies Act 2013 provisions are applicable to private limited companies also.

As per the new provisions, companies can not give loans to directors and related parties. But the act does not specify about the laons and guarantees already given by private limited companies.

The confusion will prevail over treatment to be given to the existing loans and guarantees untill MCA clarifies the issue and transitional guidelines are issued.

Posted 2 years, 11 months ago by CA Pulkit Sharma

Would like to update here,

Section 74 provides that such loans have to be refunded within a period of one year, i.e. latest by 31.3.2015. A return has also to be filed with ROC giving details of such loans by 30.6.2014. This is applicable to all companies - wither private or public.

Posted 2 years, 10 months ago by CA Pulkit Sharma

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