Restriction on Loans Provided by Private Limited Companies
Restriction on Loans Provided by Private Limited Companies Introduction Managing a company's funds is a critical decision that requires careful consideration from the management. It is essential for them to identify potential sources of funding and effectively allocate these resources to generate passive income for the organization. To optimize excess funds, companies may explore various strategies, including lending to other businesses. Not only can this strengthen business relationships, but it can also result in interest income for the lending company. In this article, we will examine the legal limitations imposed on private limited companies when providing loans to individuals and other corporate entities . Legal Provisions The Companies Act 2013 includes two distinct sections regarding loans: Section 186 for inter-corporate loans and investments, and Section 185 for loans to directors and related parties. Although the term 'loan' lacks a specific definition...