Clarification regarding loans and advances to employees under Companies Act, 2013

General Circular No. 0412015

No. 1/32/2013-CL.V
Government of India
Ministry of Corporate Affairs

5th floor, A’ wing, Shastri Bhavan
New Delhi — 110001

Dated: 10/03/2015


All Regional Directors,

All Registrar of Companies, All Stakeholders.

Subject : Clarification with regard to
section 185 and 186 of the Companies
Act, 2013 — loans and
advances to employees – reg.


This Ministry has received a number of
references seeking clarification on the applicability of provisions of section 186 of the Companies Act, 2013
relating to grant of loans and
advances by Companies to their employees.

The issue has
been examined and it is hereby clarified that loans
and/or advances made
by the companies to their employees, other than the managing or whole time directors (which is governed by section 185) are not governed by the requirements of section 186 of the Companies Act, 2013. This clarification will, however, be applicable if such loans/advances to employees are in
accordance with the conditions
of service applicable to employees and are also in accordance with the remuneration policy, in cases where such
policy is required to be formulated.

This issues with the approval of the Secretary.

 Yours faithfully,


(KMS Narayanan  )

Assistant Director Phone : 011-23387263

Copy to :

1.   PSO to Secretary

2.   PS to JS(M)/JS(B)/35(A)/JS(SP)/DII(NS)/Dil(P)

3.   E-Gov Cell for uploading on the MCA website

Guard File.

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