ABC Limited is considering to come out with a public issue of equity shares. The company is considering to extend loan to the employees including directors and key managerial personnel upto one year of their salary to en

Section 67(2) of the Companies Act, 2013 provides that no public company shall give, whether directly or indirectly and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of, or in connection with, a purchase or subscription made or to be made, by any person of or for any shares in the company or in its holding company. However, nothing mentioned above shall apply to the giving of loans by a company to persons in the employment of the company other than its directors or key managerial personnel, for an amount not exceeding their salary or wages for a period of six months with a view to enabling them to purchase or subscribe for fully paid-up shares in the company or its holding company to be held by them by way of beneficial ownership. In view of the above provisions of the Companies Act, 2013 ABC Limited will be advised as under. The loan can be extended to the employees only and cannot be extended to directors and key managerial personnel to enable them to subscribe to the equity shares in the public issue. The loan can be extended to the employees for an amount not exceeding their salary or wages for a period of six months only to enable them to subscribe to the equity shares in the public issue.