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General circular 3_2014- clarification sec 185

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1. This document is a circular from the Ministry of Corporate Affairs in India clarifying the applicability of Section 185 of the Companies Act, 2013 regarding loans, guarantees, and security provided by holding companies to subsidiaries. 2. It clarifies that until Section 186 of the new act is notified, the exemption provided in Section 372A of the old Companies Act 1956 for wholly owned subsidiaries will continue to apply. 3. The clarification only applies if loans obtained by subsidiaries from banks/financial institutions using the holding company's guarantee are used exclusively for the subsidiary's principal business activities.

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Generol Cir.culor M O3l2014 ts.t/12/2013-CL.V 6overnhent of fndio Ministry of Corporote Afidirs 5'n Floor,'A' Win9, Shdslra Bhowdn, Dr. R.P. Rood, New Delhi-110001. Daled I t4/2/2O14 All Regaohdl Directors, All Registror of componies, All Stokeholders. subject: Clorificotion wiih r€gord fo S€ction 185 of ihe Conponics Act, 2013. 5tr, This rJtinistry hos received number of represehldtions on the opplicobility of Section 185 of the componies Act, 2013 with reference Io loons tnode, guoroniee given or security provided under Section 3724 of fhe ComPoniel Act,1956. The issr'te hos been exomined with refere ce to opplicobility of Section 37?A ol the Componies Acf, 1956 vis-d-vis Section 185 of the Componies Aci. 2013. Seciion 372A of the ComPoll'i.s A.t, 1956, specificolly exenpis ony loons mode, ony guorontee given or security provided or ony investment mode by d holding conpony to its wholly owned strbsidiory. Whereos. Seciion 185 of the conponiag Act, 2013 prohibits guorontee given or any securiiy provided by o holdihg compony i^ rcspect ol ony loon ioken by its subsidiory compony except in the ordinory course of business. 2. In ord.r to mdintoin harmony wifh regqfd to opplicobility of Seclion 372A of th. conpqnies Act, 1956 rill rhe sone is repeoled ond Section 185 of the ConPonies Act, 2013 is notified, it is hereby clorified thof dny gudrdniee given or security Pt'ovided by q holding compony in raspect of loons mode by o bonk or findncidl institution to its subsidiory cornpony, exenplion os provided in clouse (d) of sub-sEction (8) of section 372A ol th. conponies Act, 1956 sholl be opplicoble till section 186 of ths ComPonies Act, 2013 is notified. This clorificotion will, however, be opplicable to coses whEre loqns so obtoined ore exclusively ulilazed by the subsidiory for its principol b'rsineSt octivitieg, Yours foiihfully, ,lil^*,bdAssisloni Director (Policy) Copy tor 6udrd File. Phone trlo. 23387263

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General circular 3_2014- clarification sec 185

  • 1. Generol Cir.culor M O3l2014 ts.t/12/2013-CL.V 6overnhent of fndio Ministry of Corporote Afidirs 5'n Floor,'A' Win9, Shdslra Bhowdn, Dr. R.P. Rood, New Delhi-110001. Daled I t4/2/2O14 All Regaohdl Directors, All Registror of componies, All Stokeholders. subject: Clorificotion wiih r€gord fo S€ction 185 of ihe Conponics Act, 2013. 5tr, This rJtinistry hos received number of represehldtions on the opplicobility of Section 185 of the componies Act, 2013 with reference Io loons tnode, guoroniee given or security provided under Section 3724 of fhe ComPoniel Act,1956. The issr'te hos been exomined with refere ce to opplicobility of Section 37?A ol the Componies Acf, 1956 vis-d-vis Section 185 of the Componies Aci. 2013. Seciion 372A of the ComPoll'i.s A.t, 1956, specificolly exenpis ony loons mode, ony guorontee given or security provided or ony investment mode by d holding conpony to its wholly owned strbsidiory. Whereos. Seciion 185 of the conponiag Act, 2013 prohibits guorontee given or any securiiy provided by o holdihg compony i^ rcspect ol ony loon ioken by its subsidiory compony except in the ordinory course of business. 2. In ord.r to mdintoin harmony wifh regqfd to opplicobility of Seclion 372A of th. conpqnies Act, 1956 rill rhe sone is repeoled ond Section 185 of the ConPonies Act, 2013 is notified, it is hereby clorified thof dny gudrdniee given or security Pt'ovided by q holding compony in raspect of loons mode by o bonk or findncidl institution to its subsidiory cornpony, exenplion os provided in clouse (d) of sub-sEction (8) of section 372A ol th. conponies Act, 1956 sholl be opplicoble till section 186 of ths ComPonies Act, 2013 is notified. This clorificotion will, however, be opplicable to coses whEre loqns so obtoined ore exclusively ulilazed by the subsidiory for its principol b'rsineSt octivitieg, Yours foiihfully, ,lil^*,bdAssisloni Director (Policy) Copy tor 6udrd File. Phone trlo. 23387263