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Loan to Directors

(Querist) 07 September 2009 This query is : Resolved 
Sir,
Show as per Section 295 (2) of the companies Act 1956 there is no restriction to give loan to the directors.
thanks for your suggestion it will help me thanks once again.riven
Manish Singh (Expert) 07 September 2009
Sec 295 (2) : Sub-section (1) shall not apply to-

(a) any loan made, guarantee given or security provided-

(i) by a private company unless it is a subsidiary of a public company, or

This clearly spells out your requirement.

also i m putting down excerpts from the note created by the finance ministry for your perusal.

"3.12 Loans to Directors and Relatives
3.12.1 Section 295(1) of the Companies Act provides that every public limited company or a
private limited company which is a subsidiary of a public limited company, shall obtain prior approval of the Central Government before giving any loan or giving any guarantee in connection with the loans to
directors, relatives of the directors or to a private limited company or a firm in which directors of the company are interested. 64 such applications, including 30 applications brought forward from the
previous year, were considered during April-December, 1996. Of these, 20 applications were approved, 15 were rejected, 23 were withdrawn/ closed and 6 remained pending as on 31st December, 1996."

the link is http ://finmin.nic.in/the_ministry/dept_eco_affairs/budget/annual_report/9697com3.PDF

I hope that solves ur confusion.riven
A. A. JOSE (Expert) 07 September 2009
Mr.Manish has well dealt with the issue, and I endorse the same.riven


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