Loan and Investment Agreements – Inter-Corporate Loans, Director Loans and Share Subscriptions

A loan agreement records the principal, interest, tenure, repayment schedule, security, events of default and remedies. For companies, the Companies Act, 2013 adds conditions. Section 186 limits loans, guarantees and investments by a company to other bodies corporate beyond specified thresholds unless approved by a special resolution, and inter-corporate loans cannot be at an interest rate lower than the prescribed benchmark. Section 185 restricts loans to directors and related entities.

Money received by a company is a “deposit” unless it falls within an exemption under the Companies (Acceptance of Deposits) Rules, 2014 — for example, loans from directors with a declaration that the funds are not borrowed, loans from other companies, or convertible notes for eligible startups. Receiving non-exempt deposits can be a serious contravention.

Investment agreements — share subscription agreements — cover the investment amount, instrument, conditions and closing mechanics. Loans or investments involving non-residents must meet FEMA rules on external commercial borrowings or foreign investment.

Basis: Companies Act, 2013 (sections 73, 179, 185, 186, 188); Companies (Acceptance of Deposits) Rules, 2014; FEMA (Borrowing and Lending) Regulations and FEM (Non-debt Instruments) Rules, 2019; Indian Stamp Act and state laws. Last updated: 27 September 2026.