Silk Segment Private Ltd. (SSPL) is a wholly owned subsidiary of Silk Block Ltd. (SBL), a listed company. The Board of Directors of SSPL have…

Provisions of the Law: Under section 2(71) of the Companies Act, 2013, a public company is one that is not a private company and has the prescribed minimum paid-up capital. Further a company that is a subsidiary of a company which is not a private company is deemed a public company for the purposes of the Act, even if it continues to describe itself as private in its Articles. Under section 2(51) of the Companies Act, 2013, Key Managerial Personnel (KMP) includes the Chief Financial Officer. Section 67(2) of the Companies Act, 2013 prohibits a public company from giving financial assistance directly or indirectly, whether by loan, guarantee, security or otherwise for the purchase of, or subscription for, its own shares or those of its holding company. Section 67(3) of the Companies Act, 2013 carves out an exception permitting a company to lend money to its employees (other than directors or KMP) up to six months' salary, to enable them to buy or subscribe fully paid shares of the company or its holding company, to be held beneficially. Analysis and Conclusion: SSPL, being a wholly owned subsidiary of SBL (not itself a private company), is deemed a public company under the proviso to Section 2(71). (i) Mr. Sohan, being an employee (Deputy Marketing Manager) and not a director or KMP, may be lent up to six months' salary, i.e., 6 × ₹1,50,000 = ₹9,00,000. The proposal to lend him ₹18,00,000 exceeds this limit and is therefore not valid to that extent. Ms. Subarna, being the CFO, is a KMP, section 67(3) does not extend to KMP, so the proposed loan to her is not valid. (ii) Section 67 does not apply to a private company in whose share capital no other body corporate has invested any money. If SBL held only 25% of SSPL's shares, SSPL would not be a subsidiary of SBL and would remain a genuine private company. However, since SBL (a body corporate) would still hold shares in SSPL, SSPL would not fall within the exempted class of private companies, and section 67 would continue to apply. The answer therefore remains the same even if SBL held only 25% of SSPL.