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of <h1>Companies Act Section 372A Limits Loans & Guarantees; Requires Special Resolution for Exceeding Capital Thresholds, Details Penalties & Exemptions.</h1> Under Section 372A of the Companies Act, 1956, a company cannot make loans, give guarantees, or acquire securities exceeding 60% of its paid-up capital and free reserves or 100% of its free reserves, whichever is higher, without a special resolution. Loans must have an interest rate not lower than the prevailing bank rate. Companies must maintain a register of such transactions, with penalties for non-compliance. Exemptions include transactions with banking, insurance, or housing finance companies, and dealings involving wholly-owned subsidiaries. Investments must be held in the company's own name, with a one-year compliance period for pre-existing investments.
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