Based on the several representations made, MCA vide its Circular No 3/2014 dated 14.2.14 clarified that exemption provided in clause (d) of sub section (8) of Section 372A of the Companies Act 1956 will continue to have its effect till the time Section 186 of the Companies Act 2013 is notified.
Hence guarantee or security provided by Holding Company in respect of loan made to its Wholly Owned Subsidiary do not require any approvals under section 185.
Circular further puts the following additional conditions;
1) Loan to be made by Bank or Financial Institution to Subsidiary
2) Loan to be exclusively utilized by Subsidiary for its principal business activity
Further because of this clarification it is cleared that all other exemptions provided in section 372A (8) are not available. Hence exemption would not available for Loan made by holding to subsidiary & also for guarantee given or security provided to a subsidiary which is not WOS.
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developed on the basis of relevant statutory provisions. Though the author has made utmost efforts to provide authentic information however, the author expressly disclaim all and any liability to any person who has read this document, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this document. This is only an knowledge sharing initiative and author do not intend to solicit any business or profession.
developed on the basis of relevant statutory provisions. Though the author has made utmost efforts to provide authentic information however, the author expressly disclaim all and any liability to any person who has read this document, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this document. This is only an knowledge sharing initiative and author do not intend to solicit any business or profession.
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In my view administrative authority can not issue a clarificatory circular like that was issued in November 2013, clarifying the position of a notification. I have observed that now a days MCA administration is exceeding their limits. The ensuing circular again is none-the-less different.
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