Section 185 – Loan to Directors – An Overview

• July 18, 2020
• CA Chandan Agarwal's Office

♦ Purpose of the provisions of Section 185: 

To address the difficulties being faced in genuine transactions due to the complete embargo on providing loans to subsidiaries with common directors, the companies are permitted to give loans to entities in which directors are interested after passing special resolution and adhering to disclosure requirements. This would give big relief to the companies.

Granting of loan, guarantee or security is nicely categorized as prohibited, conditional and exempted.

The prohibition is proposed to be made applicable for assistance to director or his partner or relative or a firm in which such director or relative is a partner or to holding company of the company.

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