Mars Ltd a public Ltd company wants to grant intercorporate loan to its wholly owned subsidiary, Jupiter Ltd. What is the limit for granting loan under Section 186 of the Companies Act, 2013? Is there a need to pass a sp

Answer 4(b) In pursuant to provisions of Section 186(2) of the Companies Act 2013, no company shall directly or indirectly: give any loan to any person or other body corporate, give any guarantee or provide security in connection with a loan to any other body corporate or person, and acquire by way of subscription, purchase or otherwise, the securities of any other body corporate exceeding 60% of its paid-up share capital plus free reserves plus securities premium account or 100% of its free reserves plus securities premium account, whichever is more. Section 186(3) of the Companies Act, 2013 states that where the aggregate of the loans and investment so far made, the amount for which guarantee or security so far provided to or in all other bodies corporate along with the investment, loan, guarantee or security proposed to be made or given by the Board, exceed the limits specified under sub-section (2), no investment or loan shall be made or guarantee shall be given or security shall be provided unless previously authorised by a special resolution passed in a general meeting. However, where a loan or guarantee is given or where a security has been provided by a company to its wholly owned subsidiary company or a joint venture company, or acquisition is made by a holding company, by way of subscription, purchase or otherwise of, the securities of its wholly owned subsidiary company, there is no need of passing a special resolution. Further, in pursuant to provisions of Section 186(5) of the Companies Act 2013, every company shall take consent of all the directors present at the board meeting and the prior approval of the public financial institution concerned where any term loan is subsisting, is obtained, before making any investment, giving loan or guarantee or security given by the company. Hence, in the given case Mars Ltd. cannot grant loan to Jupiter Ltd. as one of the Director is against the granting of loan.