Companies Act Section 378ZK — Loan, etc., to Members
CHAPTER XXI
Commercial / Corporate
Summary
The Board may give financial help to Members of the Producer Company, but only if the company's articles (its internal rules) allow it. This help can be given in two specific ways.
Under clause (a), the Board can provide a credit facility to any Member for the company's business, but this credit must be for a period not exceeding six months.
Under clause (b), the Board can give loans and advances to any Member, but only against security that is specified in the articles. These loans must be repayable within a period that is more than three months but not more than seven years from the date the loan or advance is given out.
The proviso to clause (b) adds a condition: any loan or advance given to a director or to a relative of a director can only be granted after the Members approve it in a general meeting.
Official Text
The Board may, subject to the provisions made in articles, provide financial assistance to the Members of the Producer Company by way of—
(a) credit facility, to any Member, in connection with the business of the Producer Company, for a period not exceeding six months;
(b) loans and advances, against security specified in articles to any Member, repayable within a period exceeding three months but not exceeding seven years from the date of disbursement of such loan or advances:
Provided that any loan or advance to any director or his relative shall be granted only after the approval by the Members in general meeting.