Clarification with regards to Section 185 of the Companies Act 2013

[CS CMA Meena]

Dear Members,

FYI

Regards

CS CMA MEENA

[BIJAL SALOT]

Dear Members,

In the Circular it is clarified that any guarantee given or Security provided will be exempt till section 186 of Companies Act 2013 is notified. It does not speak about loan so whether loan can be given or not?

Views of the members solicited.

Thanks & Regards,

Bijal

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[K Degaleeswaran]

Dear Members,

I refer the circular and, please clarify that whether can we take exemptions in Sec. 372A (8)(d), even when there is common directors. 

Regards

K Degaleeswaran

[Simranjeet Singh]

in the 2nd line of  second paragraph of clarification Section 186 should be there.. as Section 185 is already notified.. but when i checked in night they removed this circulars from 2014 circulars tab.. so this circular is in force or what ???

 Thanks & Regards

 ACS Simranjeet Singh

 

[SUDHIER KUMAR GUPTHA]

The said circular is numbered as 3, but MCA shows only one for 2014. 

Well before the Companies Act  is rules oriented, MCA is playing mockery with it's powers.

[CS A Rengarajan]

yes   it  is  total confusion  and  how  the  clarification  circular  will  override  the  Companies  Act,  2013

regards

 

CS A Rengarajan

9381011200

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[SUDHIER KUMAR GUPTHA]

Circular 3/2014 can be found on MCA notices and circulars scrolling version on new MCA home page

[Simranjeet Singh]

but Sir pls confirm whether MCA  site working or not

[CS A Rengarajan]

i  think  it  is  maintenance  stage

regards

[Simranjeet Singh]

ok thanks Sir..

[csyogan .]

i dont see any reason why second clarification is given.

the first clarification given on 19.11.2013 has already cleared the confusion.

can some one please explain what extra does this clarification contain other than what has already been clarified.

regards,
yogan.

On Sat, Feb 15, 2014 at 10:04 AM, K Degaleeswaran <degale...@gmail.com> wrote:

[Vivek Hegde]

Dear Mr. Yogan,

Yes it has clarified one thing. 

There was no clarity on the below:

1. Section 185 of CA 2013 prohibits inter-corporate loans and guarantees b/w holding co. and subsidiary whereas Section 372A allows such transactions by way of an exemption.

Now, they have clarified that Section 372A allowing such transactions by way of an exemption under sub-Section 8 is applicable. That mean to say, though section 185 which is already in place prohibits such transaction, such prohibition is withdrawn for the time being till Section 186 is implemented. 

Hope I am clear.

But still I am doubtful on the validity of the clarification pausing prohibition given in Section 185. Don't you think it requires a parliament approval? 

Warm Regards

CS Vivek Hegde,B.com, ACS, CWA

Vivek Hegde & Co.
Company Secretaries
No. 2034, 26th Cross, K.R.Road
Banashankari II Stage, Behind 

Sevakshetra Hospital

Bangalore-560070
Mob : 09900898223

Off: 080 26710677

[prajakta powle]

It also reinforces one thing, GUARANTEE / SECURITY BY HOLCO TO SUBCO PROHIBITED EXCEPT IN THE ORDINARY COURSE OF BUSINESS.

Weird provision.

Regards,
Prajakta Powle

[SUDHIER KUMAR GUPTHA]

Dear prajakta powle,

GUARANTEE / SECURITY BY HOLCO TO SUBCO PROHIBITED only till sec.186 of Companies Act,2013 is notified.

[csyogan .]

mr. vivkek,

the earlier notification dt. 19/11/2013 has already clarified that s.372A will be applicable till the time s.186 is notified. the wording given in the earlier notification is as under :

"It is clarified that Section 372A of the Companies Act, 1956 dealing with inter-corporate loans continue to remain in force till section 186 of the Companies Act, 2013 is notified."

And, by the second notification dt. 14/02/2014, mca is, in a way, withdrawing the clarification given via first notification and placing more restrictions.

regards,
yogan.

On Sun, Feb 16, 2014 at 8:03 AM, Vivek Hegde <vivekhe...@gmail.com> wrote:

[SUDHIER KUMAR GUPTHA]

Dear Yogan, precisely the clarification is all about holding and subsidiary cos by virtue of common directors. MCA clarifies such cos can avail the excemption under 372A of CA 1956.Hope it is clear!!!

[csyogan .]

it was clear earlier by the "19th november, 2013" notification,
but what is the reason for issuing the "14th february, 2014" ??

regards,
yogan.

[SUDHIER KUMAR GUPTHA]

Dear Yogan,

372A of CA,1956 is split into 185 and 186 of CA,2013.

185 prohibits inter corporate loans or guarantee to those companies where in Directors are intrested.

 185 of CA 2013 and 372A of CA 1956 are contradictory to each other by way of prohibiting loans and guarantee between holding and subsidiary, wherein  such relationship is purely because of common major directors.

Hence MCA  has given a clarity that inspite of sec.185 of CA 2013, 372A of CA,1956 prevails.

In a nut shell, as soon as 186 of CA 2013 is notified corporates are suggested to restructure their Boards so as to avoid holding and subsidiary relationship by virtue of common maior directors in order to extend loans or corporate guarantee to it's subsidiary companies.

[SUDHIER KUMAR GUPTHA]

Contrary views solicited

[csyogan .]

mr.sudhier,

(1) s.372A is not split into s.185 & s.186

s.185 came in the place of s.295 of old Act

s.186 came in the place of s.372A of old Act

(2) s.185 is notified
s.186 is not notified

(3) s.185 uses the phrase 'save as otherwise provided in this Act'
due to the usage of the term 'this Act', s.372A of old Act couldn't be referred to till s.186 of the new Act is notified
that is the reason why mca had to give a clarification on 19/11/2013 and allowed stakeholders to use s.372A of old Act

(4) the clarification given on 14/02/2014 is restricting the comfort given via 19/11/2013 notification and is stating that the subsidiary has to use the loans only for its principal activity

(5) that means clarification dt.19/11/2013 is being restricted by clarification dated 14/02/2014

and, no extra clarification / comfort is being given by clarification dt. 14/02/2014

contradictory views are welcome please !!

regards,

yogan.

[SUDHIER KUMAR GUPTHA]

Ok sir. thanks for the info

[Deepesh Nayak]

Good Morning to all.....

In my opinion, the wording of present circular is totally different than earlier circular and MCA has to be come with clarification that which circular will prevail.

Member, as per your opinion whether this new circular prevails on earlier, as the MCA circulars does not have any legal sanctity nor its a law, then we can challenge it as per our convenience making basis of earlier circular.???

Please suggest......


Regards,
Deepesh

 

Thanking you,

*CS Deepesh Kumar Nayak*
 Company Secretary

 *Mob. 097134-80215*
*csdeepe...@gmail.com*

[csyogan .]

logically & legally the latest will always prevail

as to the concept of the circular overriding an Act
i do agree with you, unless the Act has an inbuilt mechanism

almost all the rbi / sebi circulars do quote the section number of the Act pursuant to which they are giving that particular notification / circular; unfortunately, the same is missing with mca..

regards,

yogan.