Section 185 – Loans to Directors

 

Section 185 – Loans to Directors

Key Points:

• The Companies Act, 2013 prohibits companies from giving loans or advances to directors or their relatives except under certain circumstances.

• Provisions allow loans if the company’s shareholders approve the loan at a general meeting and if it is for a specific purpose (like business purposes).

Compliance Steps:

• Board Resolution: Obtain prior approval of the Board of Directors before extending loans to directors.

• Shareholder Approval: For loans exceeding limits, shareholder approval is mandatory.

Example:

• Infosys Ltd. strictly follows Section 185 and does not provide loans to directors outside of the prescribed legal framework, ensuring transparency and avoiding potential conflicts of interest.