Rakesh Agarwal is a Non-Executive & Non-Independent director of Happy Travels Limited, an unlisted company. The paid-up share capital of the company is ₹120 crore. The company has availed a term loan of ₹65 crore. Th

As per Section 185 of Companies Act, 2013, no company shall advance any loan to a director of the company or his relative. However, a company may advance any loan to a director of a company by passing a special resolution by the company in general meeting. The explanatory statements to notice for the general meeting shall disclose full particulars of the proposed loan. As per Section 185(3) of the Act, the provisions of subsection shall not apply to giving of any loan to the Managing Director or Whole Time Director by the company as part of service conditions extended by the company to all its employees or as per any scheme approved by members by a special resolution. As Rakesh is neither the Managing Director nor a whole time director of the company, the provisions of Section 185(1) & 185(2) are applicable to it. Hence, without passing a special resolution in the general meeting, no loan can be given to Rakesh. If Happy Travels Ltd would have been a private company, the private company can give loan to a director as per Notification dated 5th June 2015 subject to the following conditions: a) No other body corporate has invested in the share capital of the private company b) The borrowings from banks is less than twice the paid up capital or rupees ₹50 crore whichever is lower. c) The private company has not defaulted on its borrowings from banks. As Happy Travels Limited has availed a term loan of rupees ₹65 crore from a bank which is more than the ceiling of rupees ₹50 crore as per Notification dated 5th June 2015, it cannot grant the housing loan to Rakesh even if it is a private company.