Section 185 Compliance

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Loans to Company Directors: A Legal and Ethical Framework

Finance1 months ago

Source: Loans to Company Directors: A Legal and Ethical Framework

In the business world, loans to directors are a sensitive issue governed by strict legal scrutiny. Section 185 of the Companies Act, 2013, regulates such transactions, ensuring companies don't misuse funds or enable conflicts of interest. Any loan, guarantee, or security offered to directors or their related entities is closely monitored to prevent abuse of power. While the law initially imposed a complete prohibition, later amendments introduced exceptions—especially for private companies.

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