The document discusses various provisions of the Companies Act that apply to banking companies. It states that the Companies Act applies to banking companies except where inconsistent with the Banking Regulation Act. It also discusses restrictions on companies providing loans for share purchases, prohibitions on share buybacks during loan defaults, and prohibitions on accepting deposits from the public, which do not apply to banking companies. The financial statements of banking companies are not required to be in the form provided in Schedule III of the Companies Act, but in the form required under the Banking Regulation Act.

1. Applicability of the CompaniesApplicability of the Companies
Act to Banks: [S 1(4)]Act to Banks: [S 1(4)]
““The provisions ofThe provisions of this Act shall apply tothis Act shall apply to ——
 ……....
 ((cc)) banking companiesbanking companies,, except in so far as the saidexcept in so far as the said
provisions are inconsistent with the provisions of theprovisions are inconsistent with the provisions of the
Banking Regulation Act, 1949Banking Regulation Act, 1949;;
 … “… “
 Scheduled Banks covered within meaning of FIsScheduled Banks covered within meaning of FIs ::
[S 2(39)][S 2(39)]
““financial institutionfinancial institution” includes a scheduled bank, and any” includes a scheduled bank, and any
other financial institution defined or notified under the RBIother financial institution defined or notified under the RBI
Act, 1934;Act, 1934;
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2. Fraudulent inducement to lend money (SFraudulent inducement to lend money (S
36 r/w 447)36 r/w 447)
 Any person who, either knowingly orAny person who, either knowingly or recklessly makes anyrecklessly makes any
statementstatement, promise or forecast which is false, deceptive or, promise or forecast which is false, deceptive or
misleading, ormisleading, or deliberately conceals any material factsdeliberately conceals any material facts , to , to
induce another person to enter into, or to offer to enter into,induce another person to enter into, or to offer to enter into,
— (— (aa) any agreement for, or with a view to, acquiring,) any agreement for, or with a view to, acquiring,
disposing of, subscribing for, or underwriting securities; ordisposing of, subscribing for, or underwriting securities; or
((bb) any agreement, the purpose or the pretended purpose) any agreement, the purpose or the pretended purpose
of which is to secure a profit to any of the parties from theof which is to secure a profit to any of the parties from the
yield of securities or by reference to fluctuations in theyield of securities or by reference to fluctuations in the
value of securities; or (value of securities; or (cc)) any agreement for, or with a viewany agreement for, or with a view
to obtaining credit facilities from any bank or financialto obtaining credit facilities from any bank or financial
institution,institution,
shall be liable for action under section 447shall be liable for action under section 447 ..
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3. Punishment for FraudPunishment for Fraud (S 447):(S 447):
 Without prejudice to any liability including repayment of anyWithout prejudice to any liability including repayment of any
debt under this Act or any other law for the time being indebt under this Act or any other law for the time being in
force,force, any personany person who is found to be guilty of fraud, shallwho is found to be guilty of fraud, shall
be punishable with imprisonment for a term which shallbe punishable with imprisonment for a term which shall notnot
be less than six months but which may extend to ten yearsbe less than six months but which may extend to ten years
andand shall also be liable toshall also be liable to finefine which shallwhich shall not be less thannot be less than
the amount involved in the fraud, but which may extend tothe amount involved in the fraud, but which may extend to
three times the amount involved in the fraudthree times the amount involved in the fraud: Provided that: Provided that
where the fraud in question involveswhere the fraud in question involves public interest, thepublic interest, the
term of imprisonment shall not be less than three yearsterm of imprisonment shall not be less than three years..
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4. Cont..Cont..
 ExplanationExplanation.—For the purposes of this section—.—For the purposes of this section—
 ((ii) “fraud” in relation to affairs of a) “fraud” in relation to affairs of a company or any bodycompany or any body
corporatecorporate, includes, includes any act, omissionany act, omission,, concealment of anyconcealment of any
factfact oror abuse of positionabuse of position committed by any person or anycommitted by any person or any
other person with the connivance in any manner,other person with the connivance in any manner, withwith
intent to deceiveintent to deceive, to gain undue advantage from, or to, to gain undue advantage from, or to
injure the interests of, the company or its shareholdersinjure the interests of, the company or its shareholders oror
its creditorsits creditors or any other person, whether or not there isor any other person, whether or not there is
any wrongful gain or wrongful loss;any wrongful gain or wrongful loss;
 ((iiii) “wrongful gain” means the gain by unlawful means of) “wrongful gain” means the gain by unlawful means of
property to which the person gaining is not legally entitled;property to which the person gaining is not legally entitled;
 ((iiiiii) “wrongful loss” means the loss by unlawful means of) “wrongful loss” means the loss by unlawful means of
property to which the person losing is legally entitled.property to which the person losing is legally entitled.
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5. Restrictions on giving of loans byRestrictions on giving of loans by
company for purchase of its shares:company for purchase of its shares:
[S 67(2)][S 67(2)]
 ((22) No public company shall give, whether directly or) No public company shall give, whether directly or
indirectly and whether by means of aindirectly and whether by means of a loan, guarantee,loan, guarantee,
the provision of security or otherwise, any financialthe provision of security or otherwise, any financial
assistance for the purpose ofassistance for the purpose of, or in connection with, a, or in connection with, a
purchase or subscription madepurchase or subscription made or to be made, by anyor to be made, by any
person of orperson of or for any sharesfor any shares in the company or in itsin the company or in its
holding company.holding company.
 ((33) Nothing in sub-section () Nothing in sub-section (22) shall apply to—) shall apply to— (a)(a) thethe
lending of money by a banking company in the ordinarylending of money by a banking company in the ordinary
course of its business; …course of its business; …
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6. Prohibition for buy-back in certainProhibition for buy-back in certain
circumstances: (S 70)circumstances: (S 70)
((11) No company shall directly or indirectly purchase its own) No company shall directly or indirectly purchase its own
shares or other specified securities—shares or other specified securities—
(a) ….(a) ….
(b) ….(b) ….
((cc)) if a defaultif a default,, is made by the companyis made by the company,, in repayment of anyin repayment of any
term loan or interest payable thereon to any financialterm loan or interest payable thereon to any financial
institution or banking companyinstitution or banking company: Provided that the buy-back: Provided that the buy-back
is not prohibited, if the default is remedied and a period ofis not prohibited, if the default is remedied and a period of
three years has lapsed after such default ceased tothree years has lapsed after such default ceased to
subsist.subsist.
So, if there is a default in payment of a credit facility to aSo, if there is a default in payment of a credit facility to a
bank, a company is prohibited from doing any buyback ofbank, a company is prohibited from doing any buyback of
shares (S 70).shares (S 70).
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7. Prohibition on acceptance ofProhibition on acceptance of
deposits from publicdeposits from public: (S 73): (S 73)
((11) On and after the commencement of this Act, no company) On and after the commencement of this Act, no company
shall invite, accept or renew deposits under this Act fromshall invite, accept or renew deposits under this Act from
the public except in a manner provided under this Chapter:the public except in a manner provided under this Chapter:
Provided thatProvided that nothing in this sub-section shall apply to anothing in this sub-section shall apply to a
banking companybanking company and NBFC as defined in the RBI Act,and NBFC as defined in the RBI Act,
1934 and to such other company as the Central1934 and to such other company as the Central
Government may, after consultation with the Reserve BankGovernment may, after consultation with the Reserve Bank
of India, specify in this behalf.of India, specify in this behalf.
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8. Financial Statement [S 129(1)]:Financial Statement [S 129(1)]:
The financial statements shall give a true and fair view of theThe financial statements shall give a true and fair view of the
state of affairs of the company or companies,state of affairs of the company or companies, comply withcomply with
the accounting standardsthe accounting standards notified under section 133notified under section 133 andand
shall be in the form or forms as may be provided forshall be in the form or forms as may be provided for
different class or classes of companies in Schedule IIIdifferent class or classes of companies in Schedule III::
Provided that the items contained in such financialProvided that the items contained in such financial
statements shall be in accordance with the accountingstatements shall be in accordance with the accounting
standards: Provided further thatstandards: Provided further that nothing contained in thisnothing contained in this
sub-section shall apply to any insurance or bankingsub-section shall apply to any insurance or banking
company ….company ….: (since, it would be in the form and manner: (since, it would be in the form and manner
required under the Banking Regulation Act).required under the Banking Regulation Act).
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9. Powers of the Board u/s 179Powers of the Board u/s 179
 The Board of Directors of a company shall exercise theThe Board of Directors of a company shall exercise the
following powers on behalf of the company by means offollowing powers on behalf of the company by means of
resolutions passedresolutions passed at meetings of the Boardat meetings of the Board, namely:— …, namely:— …
 ((dd)) to borrow moniesto borrow monies;;
 ((ff)) to grant loans or give guarantee or provide security into grant loans or give guarantee or provide security in
respect of loansrespect of loans;;
 Provided that the Board may, by a resolution passed at aProvided that the Board may, by a resolution passed at a
meeting,meeting, delegatedelegate to any committee of directors, theto any committee of directors, the
managing director, the manager or any other principalmanaging director, the manager or any other principal
officer of the company or in the case of a branch office ofofficer of the company or in the case of a branch office of
the company, the principal officer of the branch office, thethe company, the principal officer of the branch office, the
powers specified in clauses (powers specified in clauses (dd) to () to (ff) on such conditions as) on such conditions as
it may specify:it may specify:
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10. Cont..Cont..
 Provided further that theProvided further that the acceptance by a bankingacceptance by a banking
company in the ordinary course of its business of depositscompany in the ordinary course of its business of deposits
of money from the publicof money from the public repayable on demand orrepayable on demand or
otherwise and withdrawable by cheque, draft, order orotherwise and withdrawable by cheque, draft, order or
otherwise,otherwise, or the placing of monies on deposit by a bankingor the placing of monies on deposit by a banking
company with another banking companycompany with another banking company on suchon such
conditions as the Board may prescribe,conditions as the Board may prescribe, shall not beshall not be
deemed to be a borrowingdeemed to be a borrowing of moniesof monies oror, as the case may, as the case may
be,be, a making of loansa making of loans by a banking company within theby a banking company within the
meaning of this section.meaning of this section.
 Explanation IExplanation I.—Nothing in clause (.—Nothing in clause (dd) shall apply to) shall apply to
borrowings by a banking company from other bankingborrowings by a banking company from other banking
companies or from the RBI, the SBI or any other bankscompanies or from the RBI, the SBI or any other banks
established by or under any Act.established by or under any Act.
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11. Restrictions on powers of Board: (SRestrictions on powers of Board: (S
180) (previously O.R., now S.R.)180) (previously O.R., now S.R.)
 ((11) The Board of Directors of a company shall exercise the) The Board of Directors of a company shall exercise the
following powers only with the consent of the company by afollowing powers only with the consent of the company by a
special resolutionspecial resolution , namely:—, namely:—
 ((aa) to sell, lease or otherwise dispose of the whole or) to sell, lease or otherwise dispose of the whole or
substantially the whole of the undertaking of the companysubstantially the whole of the undertaking of the company
or where the company owns more than one undertaking, ofor where the company owns more than one undertaking, of
the whole or substantially the whole of any of suchthe whole or substantially the whole of any of such
undertakings.undertakings.
 ExplanationExplanation.—(.—(ii) “undertaking” shall mean an undertaking in which the) “undertaking” shall mean an undertaking in which the
investment of the company exceeds 20% of its net worth as per the auditedinvestment of the company exceeds 20% of its net worth as per the audited
balance sheet of the preceding financial year or an undertaking whichbalance sheet of the preceding financial year or an undertaking which
generates 20% of the total income of the company during the previousgenerates 20% of the total income of the company during the previous
financial year; (financial year; (iiii) “substantially the whole of the undertaking” in any financial) “substantially the whole of the undertaking” in any financial
year shall mean 20% or more of the value of the undertaking as per theyear shall mean 20% or more of the value of the undertaking as per the
audited balance sheet of the preceding financial year;audited balance sheet of the preceding financial year;
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12. Cont..Cont..
 ((cc) to borrow money, where the money to be borrowed,) to borrow money, where the money to be borrowed,
together with the money already borrowed by the companytogether with the money already borrowed by the company
willwill exceed aggregate of its paid-up share capitalexceed aggregate of its paid-up share capital
and free reservesand free reserves ,, apart from temporary loans obtainedapart from temporary loans obtained
from the company’s bankers in the ordinary course offrom the company’s bankers in the ordinary course of
businessbusiness::
Provided that theProvided that the acceptance by a banking company, in theacceptance by a banking company, in the
ordinary course of its business, of deposits of money fromordinary course of its business, of deposits of money from
the publicthe public, repayable on demand or otherwise, and, repayable on demand or otherwise, and
withdrawable by cheque, draft, order or otherwise,withdrawable by cheque, draft, order or otherwise, shall notshall not
be deemed to be a borrowingbe deemed to be a borrowing of monies by the bankingof monies by the banking
company within the meaning of this clause.company within the meaning of this clause.
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13. Cont..Cont..
 ExplanationExplanation.—the expression “temporary loans” means loans.—the expression “temporary loans” means loans
repayable on demand or within six monthsrepayable on demand or within six months from the date offrom the date of
the loan such as short-term, cash credit arrangements, thethe loan such as short-term, cash credit arrangements, the
discounting of bills and the issue of other short-term loans of adiscounting of bills and the issue of other short-term loans of a
seasonal character,seasonal character, but does not include loans raised for thebut does not include loans raised for the
purpose of financial expenditure of a capital naturepurpose of financial expenditure of a capital nature;;
 ByBy MCA General Circular No. 4/2014MCA General Circular No. 4/2014, it has clarified that “the, it has clarified that “the
resolution passed u/s 293 of the old Act prior to 12.09.2013resolution passed u/s 293 of the old Act prior to 12.09.2013
with reference to borrowings (subject to the limits prescribed)with reference to borrowings (subject to the limits prescribed)
and / or creation of security on assets of the company will beand / or creation of security on assets of the company will be
regarded as sufficient compliance of the requirements of Sregarded as sufficient compliance of the requirements of S
180 of the new Act for a period of 1 year from the date of180 of the new Act for a period of 1 year from the date of
notification of S 180 of the Act.”notification of S 180 of the Act.”
 S 293 was applicable to Public company, now S 180 isS 293 was applicable to Public company, now S 180 is
applicable to private companies as well.applicable to private companies as well.
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14. Loans to Director etc (S 185)Loans to Director etc (S 185)
 ((11) Save as otherwise provided in this Act, no company) Save as otherwise provided in this Act, no company
shall, directly or indirectly,shall, directly or indirectly, advance any loanadvance any loan, including any, including any
loan represented by a book debt,loan represented by a book debt, to any of its directorsto any of its directors oror
to any other PERSON in whom the director is interestedto any other PERSON in whom the director is interested oror
give any guarantee or provide any securitygive any guarantee or provide any security inin
connection with any loan taken by him or such otherconnection with any loan taken by him or such other
personperson::
 Provided that nothing contained in this sub-section shallProvided that nothing contained in this sub-section shall
apply to—apply to—
 ((aa) the giving of any loan to a managing or whole-time) the giving of any loan to a managing or whole-time
director— (director— (ii) as a part of the conditions of service extended) as a part of the conditions of service extended
by the company to all its employees; or (by the company to all its employees; or (iiii) pursuant to any) pursuant to any
scheme approved by the members by a special resolution;scheme approved by the members by a special resolution;
oror
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15. Cont..Cont..
 ((bb) a company which in the ordinary course of its business) a company which in the ordinary course of its business
provides loans or gives guarantees or securities for the dueprovides loans or gives guarantees or securities for the due
repayment of any loan and in respect of such loans anrepayment of any loan and in respect of such loans an
interest is charged at a rate not less than the bank rateinterest is charged at a rate not less than the bank rate
declared by the Reserve Bank of India.declared by the Reserve Bank of India.
Explanation.Explanation.—For the purposes of this section, the—For the purposes of this section, the
expression “to any other person in whom director isexpression “to any other person in whom director is
interested” means—interested” means—
((aa) any director of the lending company, or of a company) any director of the lending company, or of a company
which is its holding company or any partner or relative ofwhich is its holding company or any partner or relative of
any such director;any such director;
((bb) any firm in which any such director or relative is a partner;) any firm in which any such director or relative is a partner;
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16. Cont.Cont.
((cc) any private company of which any such director is a) any private company of which any such director is a
director or member;director or member;
((dd) any) any body corporatebody corporate at a general meeting of which not lessat a general meeting of which not less
than 25% of the total voting power may be exercised orthan 25% of the total voting power may be exercised or
controlled by any such director, or by two or more suchcontrolled by any such director, or by two or more such
directors, together; ordirectors, together; or
((ee)) any body corporate, the Board of directors, managingany body corporate, the Board of directors, managing
director or manager, whereof is accustomed to act indirector or manager, whereof is accustomed to act in
accordance with the directions or instructions of the Board,accordance with the directions or instructions of the Board,
or of any director or directors, of the lending companyor of any director or directors, of the lending company..
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17. Penalties: [S 185(2)]Penalties: [S 185(2)]
 If any loan is advanced or a guarantee or security isIf any loan is advanced or a guarantee or security is
given or provided in contravention of the provisions ofgiven or provided in contravention of the provisions of
sub-section (1), the company shall be punishablesub-section (1), the company shall be punishable
with fine which shall not bewith fine which shall not be less than five lakhless than five lakh rupeesrupees
but which may extend tobut which may extend to twenty-five lakh rupeestwenty-five lakh rupees ,,
 and the director or the other person to whom any loan isand the director or the other person to whom any loan is
advanced or guarantee or security is given or provided inadvanced or guarantee or security is given or provided in
connection with any loan taken by him or the otherconnection with any loan taken by him or the other
person, shall be punishable withperson, shall be punishable with imprisonmentimprisonment whichwhich
may extend tomay extend to six monthssix months or withor with finefine which shall notwhich shall not
bebe less than five lakh rupeesless than five lakh rupees but which may extendbut which may extend
toto twenty-five lakh rupees, or with both.twenty-five lakh rupees, or with both.
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18. Finally, exemption granted underFinally, exemption granted under
Rules: [RuleRules: [Rule 10; Chapter 12]10; Chapter 12]
(1) Any(1) Any loanloan made by amade by a holding company to its WOSholding company to its WOS oror
anyany guarantee given or security providedguarantee given or security provided by a holdingby a holding
company in respect of any loan made to its WOS companycompany in respect of any loan made to its WOS company
is exempted from the requirements of S 185; andis exempted from the requirements of S 185; and
(2) Any(2) Any guarantee given or security providedguarantee given or security provided by aby a holdingholding
company in respect of loan made by any bank orcompany in respect of loan made by any bank or
financial institution to its subsidiary companyfinancial institution to its subsidiary company isis
exempted from the requirements under this section:exempted from the requirements under this section:
Provided that such loans made under sub-rule(1) and (2)Provided that such loans made under sub-rule(1) and (2)
are utilised by the subsidiary company for its principleare utilised by the subsidiary company for its principle
business activitiesbusiness activities..
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19. Inter-corporate Loan & Investment byInter-corporate Loan & Investment by
the Companies: (S 186)the Companies: (S 186)
((11) A company may make investment through not more than) A company may make investment through not more than
two layers of investment companies:two layers of investment companies:
Provided that the provisions of this sub-section shall notProvided that the provisions of this sub-section shall not
affect,—affect,—
((ii)) a company from acquiring any other company incorporateda company from acquiring any other company incorporated
in a country outside India if such other company hasin a country outside India if such other company has
investment subsidiaries beyond two layers as per the lawsinvestment subsidiaries beyond two layers as per the laws
of such country;of such country;
((iiii)) a subsidiary company from having any investmenta subsidiary company from having any investment
subsidiary for the purposes of meeting the requirementssubsidiary for the purposes of meeting the requirements
under any law or under any rule or regulation framed underunder any law or under any rule or regulation framed under
any law for the time being in force.any law for the time being in force.
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20. Relevant portion of S 186 InRelevant portion of S 186 In
Nutshell-Nutshell-
 No company shall directly or indirectly give any loan toNo company shall directly or indirectly give any loan to
any other person or body corporate exceeding 60% of itsany other person or body corporate exceeding 60% of its
paid up share capital, free reserves and share premiumpaid up share capital, free reserves and share premium
or 100% of its free reserves and securities premiumor 100% of its free reserves and securities premium
whichever is more.whichever is more.
 If the company proposes to advance any such loanIf the company proposes to advance any such loan
exceeding its limits then prior approval by means of aexceeding its limits then prior approval by means of a
special resolution passed at a general meeting shall bespecial resolution passed at a general meeting shall be
required.required.
 Prior approval of the public financial institution shall alsoPrior approval of the public financial institution shall also
be required if there is any default in repayment ofbe required if there is any default in repayment of
instalment or interest on the term loan.instalment or interest on the term loan.
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21. Cont..Cont..
 ((1111) Nothing contained in S 186, except sub-section () Nothing contained in S 186, except sub-section (11),),
shall apply—shall apply—
 ((aa) to a) to a loan made, guarantee given or securityloan made, guarantee given or security
provided by a banking companyprovided by a banking company or an insuranceor an insurance
company or a housing finance companycompany or a housing finance company in the ordinaryin the ordinary
course of its businesscourse of its business or a company engaged in theor a company engaged in the
business of financing of companies or of providingbusiness of financing of companies or of providing
infrastructural facilities;infrastructural facilities;
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23. Investments of company to beInvestments of company to be
held in its own name: (S 187)held in its own name: (S 187)
 ((11) All investments made or held by a company in any) All investments made or held by a company in any
propertyproperty,, securitysecurity oror other assetother asset shall be made and held byshall be made and held by
it in its own name:it in its own name:
 ((22) Nothing in this section shall be deemed to prevent a) Nothing in this section shall be deemed to prevent a
company— (company— (aa) from) from depositing with a bankdepositing with a bank, being the, being the
bankers of the company,bankers of the company, any shares or securitiesany shares or securities for thefor the
collection of any dividend or interest payable thereon; or (collection of any dividend or interest payable thereon; or (bb))
from depositing with, or transferring to, or holding in thefrom depositing with, or transferring to, or holding in the
name of, the SBI or a scheduled bank, being the bankersname of, the SBI or a scheduled bank, being the bankers
of the company, shares or securities, in order to facilitateof the company, shares or securities, in order to facilitate
the transfer thereof:the transfer thereof:
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24. Cont..Cont.. Provided that if within a period of six months from the dateProvided that if within a period of six months from the date
on which the shares or securities are transferred by theon which the shares or securities are transferred by the
company to, or are first held by the company in the namecompany to, or are first held by the company in the name
of, the SBI or a scheduled bank as aforesaid, no transfer ofof, the SBI or a scheduled bank as aforesaid, no transfer of
such shares or securities takes place, the company shall,such shares or securities takes place, the company shall,
as soon as practicable after the expiry of that period, haveas soon as practicable after the expiry of that period, have
the shares or securities re-transferred to it from the SBI orthe shares or securities re-transferred to it from the SBI or
the scheduled bank or, as the case may be, again hold thethe scheduled bank or, as the case may be, again hold the
shares or securities in its own name; or (shares or securities in its own name; or (cc)) from depositingfrom depositing
with, or transferring to, any person any shares or securities,with, or transferring to, any person any shares or securities,
by way of security for the repayment of any loan advancedby way of security for the repayment of any loan advanced
to the company or the performance of any obligationto the company or the performance of any obligation
undertaken by itundertaken by it; (; (dd)) from holding investments in the namefrom holding investments in the name
of a depository when such investments are in the form ofof a depository when such investments are in the form of
securities held by the company as a beneficial ownersecurities held by the company as a beneficial owner..
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25. Other ImplicationsOther Implications
 Provisions relating to class action u/s 245 of theProvisions relating to class action u/s 245 of the
Companies Act, 2013 do not apply to Banking companies.Companies Act, 2013 do not apply to Banking companies.
If a Company defaults in repayment of loan to the Banks-If a Company defaults in repayment of loan to the Banks-
 A.A. The Company can not issue shares with differentialThe Company can not issue shares with differential
voting rights. (Rule 4; Chapter 4).voting rights. (Rule 4; Chapter 4).
 B. The Company can not buy back its own shares (RuleB. The Company can not buy back its own shares (Rule
17; Chapter 4). [17; Chapter 4). [NoteNote: The company can not utilize any: The company can not utilize any
money borrowed from banks or financial institutions for themoney borrowed from banks or financial institutions for the
purpose of buying back its shares.]purpose of buying back its shares.]
 C. Company needs to take consent of the respective BanksC. Company needs to take consent of the respective Banks
before making any inter-corporate loan, investment orbefore making any inter-corporate loan, investment or
giving any guarantee/ security for any person. (S 186)giving any guarantee/ security for any person. (S 186)
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26. Other implicationsOther implications
 Companies is required to appoint internal auditor if,Companies is required to appoint internal auditor if,
outstanding loans from banks/ public financial institutionsoutstanding loans from banks/ public financial institutions
exceeding Rs. 100 crore or more at any point of timeexceeding Rs. 100 crore or more at any point of time
during the preceding financial year: (Rule 13; Chapter 9)during the preceding financial year: (Rule 13; Chapter 9)
 Every listed companies which have borrowed money fromEvery listed companies which have borrowed money from
banks and public financial institutions in excess of fiftybanks and public financial institutions in excess of fifty
crore rupees needs to establish a vigil mechanism (Rule 7;crore rupees needs to establish a vigil mechanism (Rule 7;
Chapter 12).Chapter 12).
 The provisions for appointment of nominee directors, as aThe provisions for appointment of nominee directors, as a
part of lending contracts, now also extends to NBFCs, if thepart of lending contracts, now also extends to NBFCs, if the
requisite power is there in the loan agreement. That is torequisite power is there in the loan agreement. That is to
say, where the loan agreement empowers, an NBFC maysay, where the loan agreement empowers, an NBFC may
appoint its nominee on the board of the borrower company.appoint its nominee on the board of the borrower company.
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27.  Bank should also be very cautious about dealings withBank should also be very cautious about dealings with
various issues pertaining to the Related Partyvarious issues pertaining to the Related Party
Transactions(S 188), Disclosure of interest (S 184),Transactions(S 188), Disclosure of interest (S 184),
dealings with cross holdings, JVs, or holding –subsidiarydealings with cross holdings, JVs, or holding –subsidiary
relations.relations.
 Must make most suitable Corporate Governance StructureMust make most suitable Corporate Governance Structure
in line with the compliance of applicable laws (includingin line with the compliance of applicable laws (including
RBI Guidelines on the same)RBI Guidelines on the same)..
10/19/15 Corporate Legal Practice

28. Corporate Legal
Practice
““A journey of a thousand milesA journey of a thousand miles
begins with a single step.”begins with a single step.”
BY:BY:
HARSHUL SHAHHARSHUL SHAH
ADVOCATE & SOLICITORADVOCATE & SOLICITOR
Mob: +91 9867129866/ Tel: +91 022 26840267Mob: +91 9867129866/ Tel: +91 022 26840267
Email:Email: harshul.shah@corporatelegalpractice.comharshul.shah@corporatelegalpractice.com
Facebook: https://www.facebook.com/harshul1979Facebook: https://www.facebook.com/harshul1979
10/19/15