Loans Facilities provided to the Director

To ensure that the Board of Directors of a public company does not misuse the funds of the
company for the benefits of its directors, company provides loans to its director (for a guarantee or
security) or the related parties, with proper approval from Central Government. The prohibition
against loans to directors does not apply - Sec. 295 (2).

According to Sec.295 Sub section (2), Sub-section (1) shall not apply to-

(a) any loan made, guarantee given or security provided-

(i) by a private company unless it is a subsidiary of a public company, or

(ii) by a banking company;

(b) any loan made by a holding company to its subsidiary company;]

(c) any guarantee given or security provided by a holding company in respect of any
loan made to its subsidiary company.]

Interests of a Director

When any company enters into a contract relating to the business of the company with the
directors, the consent of the board of directors is required by a way of resolution. Every director of a
company has to disclose the nature of his concern or interest at a meeting of the board of directors.
Every Director shall disclose the nature of his concern or interest in a contract or arrangement at the
meeting of the Board. Disclosure is not required where any of the Directors of one company or two
or more of them together hold 2% or less than 2% of paid up share capital of the company.