Applicable of Section 185 for intercorporate deposit

[Bhairob Chandra Bor]

Dear Sir,

we need your kind advice from the following facts:

1. we have an intercompany deposit of Rs.5 cr

2. both the company is a Limited company (not a Pvt.Ltd Co.)

3. one director is common for both the companies

is the Section 185-loan to director etc. applicable in our case? If applicable what will be procedures to stay safe from the statutory point view?

Kind Regards,

BCB

[Debtosh Dey]

Inter corporate deposit does not automatically become loan to director u/s 185 even if one or more directors are common.

[sanjeev bajaj]

sec 185 is applicable in this case, please read explanation.

[Debtosh Dey]

Inter-corporate loan attracts sec 185 only if the borrower is a holding co or pvt co with a common director or a body corporate where lender controls atleast 25 percent voting power or otherwise directions/ instructions. In the instant case, the borrower is not a pvt co. It needs to be seen whether any of the other conditions apply (These are not stated in the query). If it applies, then sec 185 is attracted. Otherwise not.

Debtosh Dey

AI Summary

Loans to directors: intercorporate deposits aren't automatically treated as such; applicability turns on company type and control.
Intercorporate deposits between two public companies sharing a director do not automatically qualify as loans to directors; the loan-to-director restrictions apply only if the borrower is a private company or a holding company of the lender, or where the lender controls the borrower through specified voting power thresholds or by otherwise directing its affairs, so applicability must be assessed by examining company type and control relationships.