| 1) |
No company shall directly or indirectly make a loan to- |
| iii) |
any other company which is a subsidiary of its holding company; or |
| b) |
any other company or other body corporate controlled by one or more directors managers of the company or of its holding company or of any company which is a subsidiary of its holding company; |
or provide any security to any person in connection with an obligation of such director, manager, company or other body corporate.
| 1A) |
For the purpose of subsection (1)- |
| i) |
a loan of money, shares, debentures of any other property; and |
| ii) |
any credit extended by a company, where the debt concerned is not payable or being paid in accordance with normal business practice in respect of the payment of debts of the same kind; and |
| b) |
one or more directors or managers of a company contemplated in subsection (1)(b) shall be deemed to control another company or body corporate only if- |
| i) |
such director or manager or his nominee is a member or such directors or managers or their nominees are members of such other company or body corporate and the composition of its board of directors is controlled by such director, manager or nominee or such directors, managers or nominees, and such composition shall be deemed to be so controlled if such director or manager or his nominee or such directors or managers or their nominees may, by the exercise of some power and without the consent or concurrence of any other person, appoint or remove the majority of the directors concerned, and such director, manager or nominee or such directors, managers or nominees shall be deemed to have power to appoint a director where a person cannot be appointed as a director without his or their consent or concurrence; or |
| ii) |
more than one-half of the equity share capital of that other company or body corporate or, if that other body corporate is a corporation as defined in section 1 of the Close Corporations Act, 1984 (Act No. 69 of 1984), more than 50 per cent of the interest in such corporation is held by such director, manager or nominee or such directors, managers or nominees; and |
| c) |
"security" includes a guarantee. |
| 1B) |
The provisions of subsection (1) and of paragraph (b) of subsection (1A) shall not be construed as prohibiting a company from making a loan to, or providing security to any person in connection with an obligation of, its holding company or subsidiary or a subsidiary of such holding company; |
| 2) |
The provisions of subsection (1) shall not apply- |
| i) |
the making of a loan by a company to its own director or manager; |
| ii) |
the provision of security by a company in connection with an obligation of its own director or manager; |
| iii) |
the making of a loan by a company to any other company or other body corporate controlled by one or more of the directors or managers of the first-mentioned company; or |
| iv) |
the provision of security by a company in connection with an obligation of any other company or other body corporate controlled by one or more of the directors or managers of the first-mentioned company, |
with the prior consent of all the members of the company or in terms of a special resolution relating to a specific transaction: Provided that in respect of any such loan made or security provided at any time before the date of commencement of the Companies Amendment Act, 1992, such consent shall be deemed to have been given if the transaction concerned has subsequently, whether before or after that date, been ratified by all the members of the company; or
| b) |
subject to the provisions of subsection (3), in respect of anything done to provide any director or manager with funds to meet expenditure incurred or to be incurred by him for the purposes of the company concerned or for the purpose of enabling him properly to perform his duties as director or manager of that company; or |
| c) |
in respect of anything done bona fide in the ordinary course of the business of a company actually and regularly carrying on the business of the making of loans or the provision of security; or |
| e) |
to the making of a loan or the provision of security with the approval of the company in general meeting for housing for its director or manager, or |
| i) |
the making of a loan by a company to a director or manager of its subsidiary; or |
| ii) |
the provision of security by a company to another person in connection with an obligation of a director or manager of its subsidiary: |
provided such director or manager is not also a director or manager of such company itself.
| 3) |
No loan shall be made or security provided by virtue of the provisions of sub-section (2) (b), except- |
| a) |
with the prior approval of the company given at a general meeting at which the amount of the loan or the extent of the security and the purposes thereof are disclosed; or |
| b) |
on condition that, if the approval of the company is not given as aforesaid at or before the next annual general meeting of the company, the loan shall be repaid or the liability under the security shall be discharged, within six months from the conclusion of that annual general meeting. |
| 4) |
Any director or officer of a company who authorises, permits or is a party to the making of any loan or the provision of any security contrary to the provisions of this section, shall- |
| a) |
be liable to indemnify the company and any other person who had no actual knowledge of the contravention, against any loss directly resulting from the invalidity of such loan or security; and |
| b) |
be guilty of an offence. |
| 5) |
For the purposes of subsection (4) "director or officer of a company" includes, where the company is a subsidiary, any director or officer of its holding company. |
Public Service Commission Act, 1997
