Restriction on transaction between companies

Restriction on transaction between companies

(1) No company shall, where directly or indirectly, lend money to another company in excess of an amount that is sixty percent of its paid-up capital and free reserves or an amount to be set by hundred percent of its free reserves, whichever is the higher, give guarantee for a loan borrowed by another company or make investment in the securities of another company in excess of the said amount .

(2) Provided, however, that this provision shall not apply to a company carrying on banking or financial transaction, insurance company, company with main objective to buy and sell securities, private company which has not borrowed any loan from a bank or financial intuitions, company with objective to provide infrastructure facility, and investment made by the holding company in its fully owned subsidiary company, money lent by such holding company to such subsidiary and guarantee given by such holding company for a loan borrowed by such subsidiary and investment made in right shares issued under this Act.

(3) Subject to Sub-section(1), a company shall maintain the details, as prescribed, on the money lent by it to another company, the investment made by it in such company or guarantee given by it for a loan borrowed by such another company.