Comment whether the following loan transactions fall under section 185 of the Act requiring a special resolution: (i) A Ltd. extends a loan of ₹5 crore to Maxima LLP in which Krishna, a director of the Company, is a part

Section 185(2) of the Companies Act, 2013 provides that a company may advance any loan to a person in whom any of the directors of the Company is interested subject to passing a special resolution and the loan being utilized by the borrowing company for its principal business activities. Loan to Maxima LLP (Krishna, director, is partner): As per Explanation (b) to Section 185(2), while defining the 'person in whom the director is interested' includes bodies corporate in which not less than 25% of the voting power is exercised by such director whether alone with one or more other Director of the lending company. Hence, unless Krishna, whether alone or with one or more, other Directors of A Ltd., exercises not less than 25% of the voting power in Maxima LLP, the loan given by A Ltd to Maxima LLP need not comply with requirements of Section 185(2). Housing loan to Aditya (part-time director): Section 185 of Companies Act, 2013 exempts any loan given to the managing director or whole-time director as a part of condition of service extended by the company from the application of Section 185(2). However a part-time director is not covered under the exemption and hence the case has to comply with Section 185(2). Loan to S Ltd. (R Ltd. holds 55% equity): Any loan made by a holding company to its wholly owned subsidiary company is exempt from the application of Section 185(2). In this case, S Ltd is not wholly owned subsidiary of R Ltd and hence this case requires compliance with Section 185(2) of Companies Act, 2013. Housing loan to Shyam (GM, then director): Since, Shyam was not a director at the time of advancing the loan, hence, this case does not requires compliance with Section 185(2) of Companies Act, 2013. The provisions of Section 185(2) require compliance only at the time of the transaction and any subsequent change in the status of the employee does not invalidate the transaction.