MCA Notifies Change in Rules for Loans and Guarantees by Companies – November 2025 Update

The Ministry of Corporate Affairs (MCA) has recently notified an important change impacting how companies handle loans, guarantees, and securities under the Companies Act, 2013. Through the Companies (Meetings of Board and its Powers) Amendment Rules, 2025, published in the Gazette of India on 3rd November 2025, the MCA has provided greater clarity on what qualifies as the “business of financing industrial enterprises.” This update is particularly relevant for Non-Banking Financial Companies (NBFCs) and Finance Companies operating in International Financial Service Centres (IFSCs).

What is Changing?

The Ministry of Corporate Affairs (MCA) has made a new change to the Companies (Meetings of Board and its Powers) Rules, 2014. This change, called the Companies (Meetings of Board and its Powers) Amendment Rules, 2025, was officially published in the Gazette of India on 3rd November 2025.

In simple terms, this amendment gives more clarity to what counts as a “business of financing industrial enterprises” under Section 186 of the Companies Act, 2013.

Why This Change?

Earlier, there was confusion about when companies—especially NBFCs (Non-Banking Financial Companies) or Finance Companies—can give loans, guarantees, or securities without needing special board or shareholder approvals under Section 186.

This amendment clearly spells out what activities will be considered part of a company’s normal financing business, so they don’t have to follow additional approval steps every time they issue loans or guarantees in their regular course of business.

What the New Rule Says

According to the new amendment (Rule 11(2)), the government has defined “business of financing industrial enterprises” more clearly for two types of companies:

1. For NBFCs Registered with the RBI:

It now includes giving loans, providing guarantees, or offering securities for repayment of any loan, if done in the ordinary course of business.

In simple words, NBFCs can continue to provide loans or guarantees to clients as part of their usual business—this is now officially recognized under the law.

2. For Finance Companies Registered with IFSCA (International Financial Services Centres Authority):

It includes financial activities allowed under the International Financial Services Centres Authority (Finance Company) Regulations, 2021—like lending, providing guarantees, and other permitted financing activities.

This helps finance companies operating in IFSCs (like GIFT City, Gujarat) to continue their financial operations with legal clarity and fewer compliance hurdles.

What Section 186 Means

Section 186 of the Companies Act deals with how companies can:

Give loans
Offer guarantees
Provide securities
Make investments in other companies

Normally, companies need board and sometimes shareholder approvals for such transactions. However, some companies like NBFCs and IFSC finance companies are exempt, because financing is their main business.

This amendment makes that exemption clear and precise.

What This Means for Businesses

NBFCs and Finance Companies – You can continue to give loans and guarantees as part of your normal business without worrying about non-compliance under Section 186.
Corporate Clarity – The law now clearly defines what counts as "financing activity," reducing confusion during audits or MCA inspections.
Ease of Doing Business – The amendment ensures simpler, faster business operations for financial institutions, aligning with India’s push toward regulatory clarity.

What Companies Should Do Now

NBFCs and IFSC-based Finance Companies: Review your loan and guarantee policies and ensure they align with this new clarification.
Corporate Legal Teams: Update compliance manuals and internal checklists under Section 186.
Company Boards: No fresh resolutions are needed if activities are part of normal financing operations.

In Summary

This is a positive move by the MCA to remove ambiguity and simplify compliance for financial companies. It ensures that legitimate lending and guarantee activities by NBFCs and IFSC finance companies are not unnecessarily restricted under company law.

Ensure Compliance with MCA's New Rules – Get Expert Help from IndiaFilings!

For professional advice on how the MCA Amendment Rules, 2025 affect your company’s financing activities, it’s best to consult a Chartered Accountant (CA). Our CA can guide you through the compliance process and ensure your business is aligned with the latest regulations. Get in touch with our qualified CA today to stay compliant and secure your business operations.

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