ABC Private Ltd, a company engaged in manufacturing of electrical equipment, desirous to grant a loan to Aman Udyog (a partnership firm) as the firm is in need of business funds for expansion. Rahul, director in ABC Priv

Provisions of the Companies Act, 2013: Section 185 of the Companies Act, 2013 provides that no company shall, directly or indirectly, advance any loan, including any loan represented by a book debt to, or give any guarantee or provide any security in connection with any loan taken by any firm in which any such director or relative is a partner. Exemption for Private Companies: However, the Ministry of Corporate Affairs (MCA) vide its exemption notification dated 5th June, 2015, provides that Section 185 shall not apply to a Private Company: in whose share capital no other body corporate has invested any money; if the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid-up share capital or ₹50 crore, whichever is lower; and such a company has no default in repayment of such borrowings subsisting at the time of making transactions under this section. Further, the benefits of the Exemption Notification dated 05th June, 2015, are available only to such private companies which have not committed a default in filing its financial statements under Section 137 of the Companies Act, 2013 or annual return under Section 92 of the Companies Act, 2013 with the Registrar of Companies. Application to the given case: ABC Private Ltd. wants to grant a loan to Aman Udyog, a partnership firm. Rahul, a director in ABC Private Ltd., is a partner in Aman Udyog. This falls under the prohibition of Section 185. Conclusion: Therefore, ABC Private Ltd. **can grant a loan to Aman Udyog** (Partnership Firm) where Rahul is a director in ABC Private Ltd. and a partner in Aman Udyog **only if all the above-mentioned conditions** (for availing the benefits of the exemption notification dated 05th June, 2015) in respect of ABC Private Ltd. are fulfilled. If any of these conditions are not met, ABC Private Ltd. cannot grant the loan.