Section 295 of the Companies Act, 2013
Section 295 of the Companies Act, 2013 relates to the Restrictions on making loans and investments by a company.
📜 Section 295 – Restrictions on making loans and investments
🔹 Key Provisions:
Restrictions on Loans and Investments:
A public company cannot, except with the previous approval of the company by a special resolution in a general meeting:
Give any loan, or give any guarantee or provide security in connection with a loan to any person or body corporate, or
Acquire by way of subscription, purchase, or otherwise, the securities of any other body corporate,
Invest the funds of the company in securities of any other body corporate.
Proviso:
The above restrictions do not apply to private companies.
Purpose:
To prevent misuse of company funds and protect interests of shareholders and creditors by ensuring that loans, guarantees, and investments are properly approved.
❗ Exceptions / Related Provisions:
Certain exceptions and detailed conditions are specified under other sections (like Sections 186, 188) dealing with loans, investments, and related party transactions.
Loans to directors or related parties require special attention under other sections.
✅ Summary:
Public companies must obtain special resolution approval before granting loans, guarantees, or making investments.
Private companies are generally exempt from this section.
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