Clarification on Section 186(7) of the Companies Act, 2013

The Ministry of Corporate affairs has issued a General Circular No. 06/2015 dated 9th April, 2015 to provide clarification on the matters such as whether the yield on the tax free bonds if greater than the required RBI yield would lead to the contravention of the Section 186(7) or not.

The matter has been examined in the light of the above provisions and it is hereby clarified that where the effective yield (effective rate of return) on tax free bonds is greater than the prevailing yield of one year, three year, five yea-r or ten year Government Security closest to the tenor of the loan, there is no violation of sub-section (7) of section 186 of the Companies Act, 2013.

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