According to the Companies Act 2013, all the listed or categorised companies in India are allowed to make investments only through two layers of investment. The Act also imposes several onerous conditions for inter-corporate loans. Under the Companies Act 2013, no company shall give out any loans directly or indirectly to the directors. This also applies to any individuals who might be favoured or shown an interest in by any of the directors. The companies are not even allowed to guarantee anything in connection with the loans to the afore mentioned people. Detailed descriptions have been stated by the Act in relation with inter corporate loans, layered investments and the various types of funding portals that are permitted for the companies that are functioning both in the public sector or the private sector. In case of funding options or any investment plans, the discussion and a unanimous approval of the Board of Directors is mandatory. In case of certain necessary loans, a special resolution is required to be passed which also requires the involvement of shareholders and their majority opinion. The CA2013 also provides prescriptions related to enhanced loan requirements, securities and even guarantees at several levels that make the regulations quite clear for the companies.
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