INTER-CORPORATE LOANS AND INVESTMENTS (SECTION 372A) 1. The provisi ons of t he Companies Act, 1956 woul d need c onsideration when a Company makes a loan to or invests in another body corporate. The provisions of section 372A are as below: 2. The sec tion appl ies to the followin g type of t ransactions (by say, Com pany A) :— a. Loan by Com pany A to any other body c orpor ate. "Loans" include in te r-c orpor ate deposits and debentures. b. Givin g by Com pany A of guaran tee of provisi on of sec uri ty in c onnect ion with a loan made by:— (i) Any other person to any other body corporate of (ii) To any other person by any other body corporate. c. Ac quisition by Company A, by way of subscription, purchase o r otherwise the securities of any other body corporate. "Securities" for this purpose would be as defined under section 2(h) of the Securities Contracts (Regulation) Act. 3. The sec tion appl ies to publ ic com panies on ly and thus not to private c om panies. The sec tion also d oes not apply loans, etc. made by the following companies:— a. Bank ing, in suranc e or h ousing companies, in t he ordinar y c ourse of their business; b. Companies established with the object of financing industrial enterprises or of providing infrastructural facilities. c. Com pany whose pri ncipal busi ness is the ac qui sition of shares, stoc k, debentures or other securities. 4. The section also does not apply to the following transactions:— a. Investment in sh ares al lotted pursuant to section 81(1)(a). b. Loans by hol ding companies to its wholl y owned subsidi ary. guarante es/sec uri ties by holdin g companies for loans to its wholly owned subsidiary. Investments in securities by holding com pany of its wholl y owned subsidi ary. 5. A company m ake l oans, etc . up to the higher of the following:—