Fwd: Presentation on Sec 185 & 186 of Companies Act 2013

[CS A Rengarajan]

Dear all

For information  please

Best  regards

---------- Forwarded message ----------
From: CS Mamta Binani <mam...@mamtabinani.com>
Date: Mon, Feb 17, 2014 at 5:58 PM
Subject: Presentation on Sec 185 & 186 of Companies Act 2013
To:

Dear Professional Colleagues

As desired by many of you, I am pleased to share the power point presentation on Sections 185 and 186 of the Companies Act, 2013. These presentations were made at the Guwahati Chapter of EIRC of ICSI.

The presentation has been updated to include the latest circular dated 14.02.2014 issued by the MCA on section 185 of the Companies Act, 2013 subsequently.

Section 185 (corresponding sections 295, 296 of the Companies Act 1956) deals with Loans to Directors etc. This section is already made applicable from 12.09.2013.

and 

Section 186 (corresponding section 372A of the Companies Act 1956) deals with Loans and Investments by Companies. This section is yet not made applicable.

Hope you shall find it useful for your reference.

Best Wishes & Regards

Mamta Binani 

+919831099551

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CS A Rengarajan

9381011200

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[Simranjeet Singh]

simply great and crisp analysis.. thnks for sharing Sir..

 Thanks & Regards

 ACS Simranjeet Singh

 

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[chandni shah]

Thanks for sharing

Regards,

CHANDNI SHAH

[Manikandan J]

Can any one clarify the provision, after the section 186 become applicable.

Can a Public Limited company /Private Limited Company give Loan or Guarantee to another Public Limited Company /Private Ltd Company where there is a common director or  interested Director?

It looks like section 185 prohibits loan or guarantees to any of its directors or to any other person in whom the director is interested.

And section 186 enables company shall give loan or guarantee to any person or other body corporate if approved by Board / Shareholders.

regards

Manikandan

[Premnarayan]

Dear Friend,

 

Sec. 185 is SPECIFIC in nature and Sec. 186 is GENERAL in nature.

 

Hence, first the transaction is required to be screened/filtered from the ‘acid test’ of Sec. 185 and if it does not attracts, then Sec. 186 will have to be looked into.

 

Thanks & regards,

CS. Premnarayan Tripathi

PRT & Associates,

Company Secretaries

201, Sarthik Square, Nr. GNFC Info Tower,

S G Highway, Ahmedabad - 380054

(M): +91 89800 26497

E-mail: premnar...@gmail.com

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[Deepesh Nayak]

Absolutely right premnarayan sir,

MCA should clarify the same through circular like earlier. At present we can prefer only section 185, even we have to prefer this only, because no option is there. If we prefer section 185 then we cant do any transaction because it is totally prohibitory in nature except some trnsactions as provided.

Regards,
Deepesh

Thanking you,

*CS Deepesh Kumar Nayak*
 Company Secretary

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

[gbalajiacs]

Dear Friends,

I would like to submit my view on the application of section 185 of the companies act 2013.

Query raised by Mr Manikandan

Can a Public Limited company /Private Limited Company give Loan or Guarantee to another Public Limited Company /Private Ltd Company where there is a common director or  interested Director?

My analysis and views

The section 185(1)  starts with

"Save as otherwise provided in this Act, no company  shall directly or indirectly advance any loan. to any of its directors or to any other person in whom the director is interested, or give any guarantee or provide any security in connection with any loan taken by him or such other person.

This section 185 prohibits loan to

i) its directors or

ii) any other person in whom director is interested

This prohibition is not permissible, if the some other provisions of the Companies Act 2013 permits to give loan or provide security.

If you carefully notice, you can understand that there is an enabling provision in the section 185 which would permit to give loan or provide security.  The enabling provision is nothing but "Save as otherwise provided in this Act", which means if elsewhere companies act 2013 permits to give loan or provide security then that provision would overtake this section 185.

In the above context, section 186(2) permits a company to give loan to any person or other body corporate  subject to certain conditions.

Therefore, my view is that a private or public limited company can give loan to another private or public company by using section 186(2) even though common directorship prevails.

I would like to hear if there is any contrary view from professional friends.

Regards

G Balaji

Learn to love; Love to learn.

a

[Deepesh Nayak]

Thanks you sir,

Sir, as the section 186 starts with "without prejudice to the other...." still we can take shelter it for doing transaction to which section 185 specifically prohibits ??

Please comment further....

Regards,
Deepesh

Thanking you,

*CS Deepesh Kumar Nayak*
 Company Secretary

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

[ankit vageriya]

Dear Sir, 

I have go through Section 186 , it is started from without prejudice to the  provision of the act. 

in consideration of manner of harmonious construction will apply and we have to follow section 185 till any clarification is not come from MCA. 

Ankit Vageriya ( Company Secretary)                                                          

Mobile: +91-9327610869                     

š Email : ankit@polylinkpolymers.com

POLYLINK POLYMERS ( I ) LTD
506, Saffron Building, Nr. Centre Point, 
Ambawadi, Ahmedabad-380006
( Tel : +91 79 26565200/26427800 
7  Fax : +91 79 26421864
" www.polylinkpolymers.com

On Mon, Apr 14, 2014 at 3:48 PM, gbalajiacs <gbala...@gmail.com> wrote:

[gbalajiacs]

Dear Mr Deepesh,

I expect that you would bring out that clause to my notice viz. "without prejudice to the provisions contained in this Act".

Before I explain, I would like to present the section 186 of the Companies Act 2013 before you in a clear manner.

The section 186 deals with two subjects viz.

Subject No.1 : 186(1) -  Investment through not more than two layers of investment companies.

Without prejudice to the provisions contained in this Act, a company shall unless otherwise prescribed, make investment through not more than two layers of investment companies

Crux of section 186(1):

Investment through more than two layers is prohibited. However, it is permitted if it prejudice any of the provisions contained in this Act.

Subject No.2: 186(2) - Inter-corporate loans and investments

Views and conclusion

This "without prejudice to the provisions contained in this Act" is applicable only to sub section (1) of section 186 and not to sub section (2) of section 186.

It means inter corporate loans and investment can be done between the companies but subject conditions prescribed in the sub section (2) of section 186.

Therefore I upheld my view that a private or public limited company can provide loan or give guarantee to another private or public limited company even though common directorship exists but subject to compliance of section 186(2).

Regards

G Balaji

Learn to love; Love to learn.

98432 23277

 

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[Deepesh Nayak]

Yes sir, nice interpretation of the lines. In strict interpretation of the section 186 as it drafted, your logic is absolutely right and acceptable. I think after this, many doubts about the applicability of section 185 will be cleared.

Others members please also give your inputs.

Regards,
Deepesh

Thanking you,

*CS Deepesh Kumar Nayak*
 Company Secretary

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

[Manikandan J]

Dear Balaji,

Thanks Balaji for your views.

Whether 186 (2) clearly clarifies the position of loans to inter corporate companies irrespective of common or interested directors?

Though it says, save as otherwise provided in the act, it is not clearly mentioned in 186(2) about interested directors or common directors.
It just refers "give loan to any person" which allows us to interpret as enabling provision! It could have been specific.

In the other side, if 186 (2) is an enabling provision, why there is prohibiting provision in 185 in the name of directors interest. (Infact specific explanation is mentioned about the meaning for " to any person in whom director is intetested" means).

Clarity from MCA would enable us to be more clear on this very important provision.

regards
Mani