Make an Inter explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
To make an inter-corporate loan or investment, obtain a unanimous Board resolution, ensure the amount is within the Section 186 limit (higher of 60% of paid-up capital plus reserves, or 100% of free reserves plus securities premium), charge interest at least equal to the comparable G-sec yield, pass a special resolution if the limit is exceeded, and record it in the register MBP-2.
Overview
Section 186 of the Companies Act, 2013 governs the giving of loans, guarantees, providing security, and making investments by one company in another. It caps how much a company can commit without shareholder approval, mandates a floor interest rate, and requires transparent record-keeping. It applies to almost every company except those in the business of financing, banking or insurance in the ordinary course.
When It Is Required & Legal Basis
Under Section 186(2), a company may, directly or indirectly, give a loan/guarantee/security or make an investment up to the higher of (a) 60% of its paid-up share capital, free reserves and securities premium, or (b) 100% of its free reserves and securities premium. Beyond this limit, prior approval by special resolution is required under Section 186(3). Section 186(1) also restricts investment through more than two layers of investment companies.
Step-by-Step Process
- Compute the limit. Calculate 60% of paid-up capital + free reserves + securities premium, and 100% of free reserves + securities premium; take the higher figure.
- Unanimous Board resolution. Pass a Board resolution with consent of all directors present sanctioning the loan/investment.
- Special resolution (if needed). If the transaction exceeds the limit, obtain members' prior approval by special resolution.
- Fix interest. Ensure the loan carries interest not below the prevailing G-sec yield of comparable tenor.
- File MGT-14. File the special/board resolution with the ROC within 30 days where applicable.
- Maintain register. Record particulars in the register in Form MBP-2.
Forms, Attachments & Fees
| Form / Document | Purpose | Timeline |
|---|---|---|
| Unanimous Board resolution | Sanction loan/investment | Before transaction |
| Special resolution + MGT-14 | Exceed 186 limits | MGT-14 within 30 days |
| MBP-2 | Register of loans, guarantees & investments | On making the transaction |
MGT-14 fees follow the standard capital-based slab (₹300–₹600 for most SMEs); additional fees on delay.
Timeline & Due Dates
Board/special resolution before the transaction; MGT-14 within 30 days of the special resolution. MBP-2 register entries at the time of making the loan, guarantee or investment.
Penalty for Delay / Non-compliance
Under Section 186(13), a contravention makes the company liable to a fine of ₹25,000 up to ₹5 lakh, and every officer in default liable to imprisonment up to two years and a fine of ₹25,000 up to ₹1 lakh.
Practical Tips
- Recompute the limit at the time of every fresh transaction — reserves change.
- A company that has defaulted on deposit repayment cannot give a loan under Section 186 until the default is made good.
- Keep the MBP-2 register at the registered office and update it in real time.
- Benchmark the interest rate to the closest-tenor G-sec and document the reference.
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Key Facts About Make an Inter
- Applies in: All states across India, under the relevant central law.
- Mode: Mostly online via the official government portal.
- Typical timeline: Ranges from a few days to a few weeks depending on the case.
- Non-compliance: May attract penalties, interest or late fees.
- Expert help: TaxClue completes the entire process end to end for you.
What are the limits under Section 186?
A company can give loans/guarantees or make investments up to the higher of 60% of paid-up capital + free reserves + securities premium, or 100% of free reserves + securities premium, without shareholder approval.
When is a special resolution required?
When the aggregate of loans, guarantees, security and investments exceeds the Section 186 limits, prior approval of members by special resolution is mandatory.
Over 90% of compliance penalties in India arise from missed due dates — timely handling can save businesses thousands of rupees each year.
Make an Inter: a key compliance topic in Indian tax and corporate law that businesses and individuals must understand to remain compliant.
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Why This Matters
Staying compliant with Indian regulations protects your business from penalties, interest and unnecessary legal trouble.