Loan to directors, etc
Section 185 of the Companies Act, 2013 deals with loan to directors, etc. No company shall, directly or indirectly, advance any loan, including any loan represented by a book debt to, or give any guarantee or provide any security in connection with any loan taken by,-- (a) any director of company, or of a company which is its holding company or any partner or relative of The Act came into force on 01 Apr 2014.
1[185. Loans to directors, etc.-- (1) No company shall, directly or indirectly, advance any loan, including any loan represented by a book debt to, or give any guarantee or provide any security in connection with any loan taken by,--
(a) any director of company, or of a company which is its holding company or any partner or relative of any such director; or
(b) any firm in which any such director or relative is a partner.
(2) A company may advance any loan including any loan represented by a book debt, or give any guarantee or provide any security in connection with any loan taken by any person in whom any of the director of the company is interested, subject to the condition that--
(a) a special resolution is passed by the company in general meeting:
Provided that the explanatory statement to the notice for the relevant general meeting shall disclose the full particulars of the loans given, or guarantee given or security provided and the purpose for which the loan or guarantee or security is proposed to be utilised by the recipient of the loan or guarantee or security and any other relevant fact; and
(b) the loans are utilised by the borrowing company for its principal business activities.
Explanation.-- For the purposes of this sub-section, the expression "any person in whom any of the director of the company is interested" means--
(a) any private company of which any such director is a director or member;
(b) any body corporate at a general meeting of which not less than twenty-five per cent. of the total voting power may be exercised or controlled by any such director, or by two or more such directors, together; or
(c) any body corporate, the Board of directors, managing director or manager, whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or directors, of the lending company.
(3) Nothing contained in sub-sections (1) and (2) shall apply to--
(a) the giving of any loan to a managing or whole-time director--
(i) as a part of the conditions of service extended by the company to all its employees; or
(ii) pursuant to any scheme approved by the members by a special resolution; or
(b) a company which in the ordinary course of its business provides loans or gives guarantees or securities for the due repayment of any loan and in respect of such loans an interest is charged at a rate not less than the rate of prevailing yield of one year, three years, five years or ten years Government security closest to the tenor of the loan; or
(c) any loan made by a holding company to its wholly owned subsidiary company or any guarantee given or security provided by a holding company in respect of any loan made to its wholly owned subsidiary company; or
(d) any guarantee given or security provided by a holding company in respect of loan made by any bank or financial institution to its subsidiary company:
Provided that the loans made under clauses (c) and (d) are utilised by the subsidiary company for its principal business activities.
(4) If any loan is advanced or a guarantee or security is given or provided or utilised in contravention of the provisions of this section,--
(i) the company shall be punishable with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees;
(ii) every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees; and
(iii) the director or the other person to whom any loan is advanced or guarantee or security is given or provided in connection with any loan taken by him or the other person, shall be punishable with imprisonment which may extend to six months or with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees, or with both.]
Section 185, The Companies Act, 2013 (Act 18 of 2013).
Cross-references
Extracted from the operative text of the enactments themselves. Every destination below exists in our corpus.
Referred to by 1
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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Yogesh Chandar Goyal v. The State
Court's Decision & Legal Precedent
DATE VERIFIED Judgment 03.05.2024 (order-4.pdf): Cognizance of Companies Act s.185 (loan to directors) on a 2017 private complaint alleging 2002–2008 advances is barred by the one-year limitation for such offences; cognizance under s.185/447 read with IPC 120B set aside (s.447 also requires SFIO/authorised government complaint). Liberty left to seek CrPC s.473 extension for s.185 before the trial court. s.452 cognizance as continuing offence upheld.
On this section: s.185 — private complaint for loan-to-director offence is subject to limitation; stale 2002–2008 advances cannot sustain 2017 cognizance without lawful extension.
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Judgments citing this section
These may be obiter dicta or a precedent, for you to study. These are the judgments where this section is quoted.
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… In fact Accused No.1 has diverted these funds to Accused No. 6 Company, a company controlled by him and his family, in the form of loan. Such transaction with a company in which a director of the company is director in both the companies, is prohibited under the provisions of Section 185 of the COMPANIES ACT 2013. xxxx 21. That Accused No. 1 and 2 have violated section 185 of the Companies Act by giving loan to companies and concern in which they are director. They have diverted/ …
Made under this section, and citing it
5 instruments state that it was made under this provision — the power to make it comes from here, so a change to any of them changes what this section requires in practice. Newest first.
- Companies ( meetings of board and its powers) (Amendment) Rules, 2017Rule 2017
- Companies(Meetings of Board and its Powers) Second Amendment RulesRule 2017
- Companies (Meetings of board and its powers) second amendment rules, 2015Rule 2015
- The Companies (Meetings and Powers of Board) Amendment Rules, 2014Rule 2014
- The Companies (Meetings of Board and its Powers) Second Amendment Rules, 2014Rule 2014
Another 7 instruments name this provision in its title or its text without being made under it.
- Clarification with regard to section 185 and 186 of the Companies Act, 2013 - loans and advances to employeesCircular 2015
- Clarification with regard to Section 185 of the Companies Act,2013.Circular 2014
- CARO 2020 dated 25.02.2020Order 2020
- Companies (Incorporation) 4th Amendment Rules,2018Rule 2018
- Companies (Auditor's Report) Order, 2016Order 2016
- Exemptions to Nidhis under section 462 of CA 2013Notification 2015
- Chapter XII - The Companies (Meetings of Board and its Powers) Rules, 2014.Rule 2014
Questions about Section 185
What have the courts held on Section 185 of the Companies Act?
Yogesh Chandar Goyal v. The State (03 May 2024) is the leading judgment on this section among those set out below: s.185 — private complaint for loan-to-director offence is subject to limitation; stale 2002–2008 advances cannot sustain 2017 cognizance without lawful extension.
How do I find court cases under Section 185 of the Companies Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Companies Act 185, section 185 Companies Act, section 185 of the Companies Act. People searching for it also type companies act 185 and 186 and section 185 of companies act. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 1 reported judgment on this section is set out on this page, beginning with Yogesh Chandar Goyal v. The State (03 May 2024).
What should I read with Section 185 of the Companies Act, and has it changed?
1 other provision in this corpus refers back to it. The rules and notifications made under it are where it actually bites, and there are 5: most recently Companies ( meetings of board and its powers) (Amendment) Rules, 2017 (2017), then Companies(Meetings of Board and its Powers) Second Amendment Rules (2017), and 3 more.
When did Section 185 of the Companies Act come into force?
Section 185 of the Companies Act, cited as Companies Act 185, came into force on 01 Apr 2014, having been enacted on 29 Aug 2013. It is in force as at the date shown on this page.
Other sections of this Act
- 2. Definitions5089 words
- 143. Powers and duties of auditors and auditing standards1867 words
- 230. Power to compromise or make arrangements with creditors and members1432 words
- 232. Merger and amalgamation of companies1416 words
- 149. Company to have Board of Directors1403 words
- 217. Procedure, powers, etc., of inspectors1390 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 15 Oct 2026. This page is not a substitute for legal advice.