Procedure For
Inter Corporate Loans and Investments
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1. It is to be kept in mind that a company can give
any loan or give any guarantee or provide security and acquire securities of
any Body corporate through Board resolution up to 60% of its paid up capital,
free reserves and security premium account or 100% of its free reserves and
security premium whichever is more.
any loan or give any guarantee or provide security and acquire securities of
any Body corporate through Board resolution up to 60% of its paid up capital,
free reserves and security premium account or 100% of its free reserves and
security premium whichever is more.
2. On the basis of aforesaid conditions and
requirements of the company meeting of Board of Directors is to be convened
after giving proper notice and proposals of giving loan or giving guarantee or
providing security etc. are to be discussed.
requirements of the company meeting of Board of Directors is to be convened
after giving proper notice and proposals of giving loan or giving guarantee or
providing security etc. are to be discussed.
3. No investment shall be made or loan or guarantee
or security given by the company unless the resolution sanctioning it is passed
at a meeting of the Board with the consent of all the directors present at the
meeting.
or security given by the company unless the resolution sanctioning it is passed
at a meeting of the Board with the consent of all the directors present at the
meeting.
4. It is to be checked whether there is any
existing loan from any public financial institution, If so, prior approval of
that public financial institution is also required for any subsequent loan from
any other source. However, prior approval of Public Financial Institution shall
not be required where the aggregate loan, investment, guarantee and security
proposed is within the limits as specified under section 186(2) and there is no
default in repayment of loan or interest thereon to the Public Financials Institution.
existing loan from any public financial institution, If so, prior approval of
that public financial institution is also required for any subsequent loan from
any other source. However, prior approval of Public Financial Institution shall
not be required where the aggregate loan, investment, guarantee and security
proposed is within the limits as specified under section 186(2) and there is no
default in repayment of loan or interest thereon to the Public Financials Institution.
5. After deciding the source of fund and quantum of
requirement, the Board may authorize one of the directors of the company or any
other person to apply for the concerned public financial institutions for
approval.
requirement, the Board may authorize one of the directors of the company or any
other person to apply for the concerned public financial institutions for
approval.
6. Arrange to convene a general meeting of
shareholders after giving proper notice and to pass special resolution therein,
where the giving of any loan or guarantee or providing any security or the
acquisition exceeds the limits specified i.e 60% of its paid up capital, free
reserves and security premium account or 100% of its reserves and security
premium whichever is more.
shareholders after giving proper notice and to pass special resolution therein,
where the giving of any loan or guarantee or providing any security or the
acquisition exceeds the limits specified i.e 60% of its paid up capital, free
reserves and security premium account or 100% of its reserves and security
premium whichever is more.
7. File the copy of special resolution in Form No.
MGT-14 along with the fee as provided in Companies (Registration of offices and
fees) Rules, 2014 with the Registrar within 30 days of passing the resolution.
Necessary documents are required to be attached as per the requirements of the
form.
MGT-14 along with the fee as provided in Companies (Registration of offices and
fees) Rules, 2014 with the Registrar within 30 days of passing the resolution.
Necessary documents are required to be attached as per the requirements of the
form.
8. Registers are to be maintained in Form MBP-2 by
every company giving loan or giving guarantee or providing security or making
an acquisition shall, from the date of its registration and the particulars of
loan and guarantee given, securities provided and acquisition are to be entered
therein.
every company giving loan or giving guarantee or providing security or making
an acquisition shall, from the date of its registration and the particulars of
loan and guarantee given, securities provided and acquisition are to be entered
therein.
9. Entries in the register shall be made
chronologically in respect of each such transaction of making such loan or
giving guarantee or providing security or making acquisition.
chronologically in respect of each such transaction of making such loan or
giving guarantee or providing security or making acquisition.
10. It is to be ensured that no loan shall be given
at a rate of interest lower than the prevailing yield of one year, three year,
five year or ten year Government security closest to the tenor of the loan.
at a rate of interest lower than the prevailing yield of one year, three year,
five year or ten year Government security closest to the tenor of the loan.
11.The company shall disclose to the members in the
financial statement the full particulars of the loans given, investment made or
guarantee given or security provided and the purpose for which the loan or
guarantee or security is proposed to be utilized by the recipient of the loan
or guarantee or security.
financial statement the full particulars of the loans given, investment made or
guarantee given or security provided and the purpose for which the loan or
guarantee or security is proposed to be utilized by the recipient of the loan
or guarantee or security.
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