Rules 11 and 13 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.
Section 186 of the Companies Act, 2013 limits loans, guarantees, security and investments by a company. Rule 11 exempts certain dealings with wholly owned subsidiaries and joint venture companies, widens the meaning of "business of financing industrial enterprises" for NBFCs and IFSC finance companies, and restricts inter-corporate loans by certain SEBI-registered companies. Rule 13 says what the special resolution must specify. This article follows the rules as amended up to G.S.R. 811(E) dated 3 November 2025 per the MCA e-book. Later amendments should be checked.
Under rule 11(1), a loan, guarantee or security by a company to its wholly owned subsidiary or a joint venture company, or an acquisition by a holding company of securities of its wholly owned subsidiary, is outside the requirement of section 186(3). The company must still disclose the details in its financial statement under section 186(4). A special resolution under section 186 must specify the total amount up to which the Board is authorised to lend, guarantee, provide security or acquire (rule 13).
Rule 11(1): the exemption from section 186(3)
Where a company gives a loan or guarantee, or provides security, to its wholly owned subsidiary company or a joint venture company, or where a holding company makes an acquisition, by subscription, purchase or otherwise, of the securities of its wholly owned subsidiary company, the requirement of section 186(3) does not apply. Section 186(3) is the requirement of prior approval by special resolution above the limits; for the sections, see Section 186: Loans and Investments.
The proviso keeps one duty alive: the company must disclose the details of such loans, guarantees, security or acquisitions in the financial statement as provided in section 186(4).
Note what the exemption does not mention. It speaks only of section 186(3). It does not touch section 185, which deals with loans to directors and related persons; rule 10 of this set (loans to directors under section 185) was omitted on 14 December 2015, and section 185 itself now governs. See Section 185: Loan to Directors and the explainer on Sections 185 and 186: Loans and Guarantees to Holding, Subsidiary and Group Companies. If you work with intra-group lending, our loan documentation support covers the agreements and board papers.
Rule 11(2): "business of financing industrial enterprises"
For section 186(11)(a), the expression "business of financing industrial enterprises" includes:
- (i) for a Non-Banking Financial Company registered with the Reserve Bank of India, "business of giving of any loan to a person or providing any guaranty or security for due repayment of any loan availed by any person in the ordinary course of its business"; and
- (ii) for a Finance Company registered with the International Financial Services Centres Authority, "activities as provided in sub-clause (a), or sub-clause (e) of clause (ii) of sub-regulation (1) of regulation 5 of the International Financial Services Centres Authority (Finance Company) Regulations, 2021 in the ordinary course of its business".
Sub-rule (2) was substituted by the Amendment Rules of 3 November 2025 (G.S.R. 811(E)); limb (ii) on IFSC Finance Companies is the new part. The words "business of financing industrial enterprises" were themselves put in by the Amendment Rules of 11 October 2019.
Rule 11(3): inter-corporate loans by SEBI-registered companies
No company that is registered under section 12 of the Securities and Exchange Board of India Act, 1992 and is also covered under such class or classes of companies as the Central Government notifies in consultation with SEBI shall take any inter-corporate loan or deposit in excess of the limits specified under the regulations applicable to it, under which it obtained its certificate of registration from SEBI. The rule itself names no class; the reader should look to the notified classes and the applicable SEBI regulations.
Rule 13: the special resolution
A resolution passed at a general meeting in terms of section 186(3) to give any loan, guarantee or investment, or to provide any security, or the acquisition under section 186(2), must specify the total amount up to which the Board of Directors is authorised to give such loan or guarantee, to provide such security or to make such acquisition. The proviso says the company must disclose to the members in the financial statement the full particulars in accordance with section 186(4).
For the explanatory statement that goes with a special resolution, section 102 applies; see Section 102: Explanatory Statement. The rule's own requirement is the total amount authorised, and that is the figure to state in the resolution. For an operational check of who may sign and how the register is kept, see Rules 12 and 14.
Summary table
| Rule | What it says | Key point |
|---|---|---|
| 11(1) | Loans, guarantees, security and acquisitions involving a wholly owned subsidiary or joint venture company are outside section 186(3) | Details still disclosed under section 186(4) |
| 11(2) | Meaning of "business of financing industrial enterprises" for an NBFC and an IFSC Finance Company | Substituted 3 November 2025 |
| 11(3) | No inter-corporate loan or deposit above limits for certain SEBI-registered companies | Classes to be notified |
| 13 | Special resolution specifies the total amount authorised | Disclosure in the financial statement |
| 10 | Omitted | Section 185 governs |
A worked example
Quartz Holdings Limited (invented) wants to lend to its wholly owned subsidiary, Quartz Retail Private Limited, and to give a guarantee for a bank loan taken by a joint venture company. Under rule 11(1) section 186(3) does not apply to either, but Quartz must disclose both in its financial statement as section 186(4) provides. Separately, Quartz plans loans to an unrelated company above the section 186 limits; it passes a special resolution that specifies the total amount up to which the Board may lend, guarantee, provide security or acquire securities, and discloses the particulars to members in the financial statement.
Practical points
- Confirm that the borrower is a wholly owned subsidiary or a joint venture company before relying on rule 11(1); the rule does not extend to other group companies.
- State a clear total amount in every special resolution.
- Enter every loan, guarantee, security or acquisition in the section 186 register within the time set in rule 12.
- For an NBFC or an IFSC Finance Company, check that the activity falls within rule 11(2).
Need help with loans, guarantees and investments?
The exemption in rule 11(1) is narrow, and a missing disclosure or an under-stated total amount in the resolution is hard to cure later. Our loan documentation support can review your group's loans, prepare the resolution and the register entries, and draft the agreements. Related party aspects are in Rule 15.
Key takeaways
- Rule 11(1) exempts loans, guarantees, security and acquisitions involving wholly owned subsidiaries and joint venture companies from section 186(3), subject to disclosure under section 186(4).
- Rule 11(2) explains "business of financing industrial enterprises" for NBFCs and IFSC Finance Companies.
- Rule 11(3) restricts inter-corporate loans and deposits by certain SEBI-registered companies.
- Rule 13: the special resolution specifies the total amount authorised.
- Rule 10 is omitted; section 185 governs loans to directors.
Read next
- Section 186: Loans and Investments
- Sections 185 and 186: Loans and Guarantees to Holding, Subsidiary and Group Companies
- Rules 12 and 14: the MBP-2 register and investments in own name
- Rules 5, 6 and 6A: circulation, committees and omnibus approval
Disclaimer: Based on the Companies Act, 2013 rules (and the Companies (Auditor's Report) Order, 2020) named above as consolidated in the MCA e-book (consulted on 3 October 2026), with the later notifications the article names. Later amendments, fees, forms and the Companies Act, 2013 provisions referred to should be checked. This article is general information, not legal advice; check the official text before acting.