LOAN AND INVESTMENT BY COMPANY
Giving Loans and making Investment is quite common in big companies because there is always a tendency of routing of funds from one entity to another. Therefore, knowing proper compliances is inevitable, else your company can be caught up by the regulator. Here is a brief process you must follow while giving a loan or making the investment:
1. Take the prior approval of the financial institution, if any loan has been taken from them.
"Normally, financial institution put this condition while sacntioning the credit"
2. Hold Board meeting for taking Board approval if the limit is up to 60% of its paid-up capital, free reserve and securities premium account or up to 100% of the free reserve and securities premium account, whichever is higher.
3. In case the investment crosses the threshold mentioned above then you have to take shareholders' approval.
4. File Form MGT-14 with Registrar within 30 days of passing resolution.
5. The company shall make entries in the register in Form MBP-2, regarding the particulars of loans & investment made as aforesaid.
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