Amendment in Section 186 of the Companies Act 2013

Amendment in Section 186 of the Companies Act 2013 

Ministry of Corporate Affairs has vide  Companies (Removal of Difficulties) Order, 2015, dated 13^th February 2014 amended section 186 (Loan and Investment by Company).  As per this order in section 186 of the Companies  Act, 2013, in sub-section (11), in clause (b), after item  (b)  (iii), the following item shall be inserted, namely:-

"(iv) made by a banking company or an insurance company or a housing finance company, making acquisition of securities in the ordinary course of its business.".

Effect of  amendment:

Section 186 of the Companies Act, 2013 governs loan and investment made by Companies. Sub section (11) provides exemptions to certain classes of Companies. Earlier exemption was not provided   to a banking   company   or an   insurance company    or    a    housing    finance    company    making      acquisition     of securities   in its ordinary course  of business.  This order removes this difficulty and henceforth acquisitions of securities by these companies are also exempt from the purview of section 186.

Amended sub section (11) of section 186 of the Companies Act, 2013 as below:

186(11) Nothing contained in this section, except sub-section (1), shall apply—

   (a)   to a loan made, guarantee given or security provided by a banking company or an insurance company or a housing finance company in the ordinary course of its business or a company engaged in the business of financing of companies or of providing infrastructural facilities;

   (b)   to any acquisition—

                                i.            (i) made by a non-banking financial company registered under Chapter IIIB of the Reserve Bank of India Act, 1934 and whose principal business is acquisition of securities:

Provided that exemption to non-banking financial company shall be in respect of its investment and lending activities;

                             ii.             made by a company whose principal business is the acquisition of securities;

                           iii.            of shares allotted in pursuance of clause (a) of sub-section (1) of section 62

                       iv.            made by a banking  company  or an insurance   company  or a housing finance   company,   making   acquisition    of  securities    in   the   ordinary course  of its  business.".

 

You can download the order from the following link

http://www.mca.gov.in/Ministry/pdf/ROD_1st_2015.pdf

Thanks & Regards:

KASHIF ALI & ASSOCIATES

Company Secretaries

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