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TargoLegal Reference Answer
Can a company give a loan to its director?
GENERALLY PROHIBITED
Direct answer
Generally, no — a company cannot freely lend directly to its director.
Section 185 of the Companies Act, 2013 restricts direct or indirect loans, guarantees and security involving directors and specified connected persons. The section also contains defined permitted situations and exceptions, so the exact recipient and transaction structure matter.
Most relevant statutory provision
Companies Act
185
Companies Act, 2013 · Chapter XII
Section 185 — Loans to Directors, etc.
What the section saysSection 185(1) begins by prohibiting a company from directly or indirectly advancing specified loans to directors and certain connected persons. Sub-section (2) creates a conditional route for specified persons in whom a director is interested, including a special-resolution requirement and use of the loan for principal business activities.
Direct loan to a directorGenerally prohibited under Section 185(1), subject to the statutory exceptions in the section.
Loan to an interested company/body corporateMay be possible under Section 185(2) when its conditions are satisfied, including the required special resolution.
What to check before actingWho the borrower is, relationship with the director, purpose of the loan, approvals and any Section 186 implications.
Related complianceBoard approvals, disclosure of interest, loan/investment limits, related-party issues and the applicable Board Rules can also matter.
Related references
Source: India Code · Companies Act, 2013Last verified: 14 Aug 2026
For general professional reference only. Verify the current official text before acting.
