The board of a manufacturing company proposes to advance a loan of ₹1 crore to its whole-time director, who is not covered by any exception under the Companies Act 2013, to enable him to purchase a residential flat. As company counsel, you would advise that such a loan is:

Section 185 of the Companies Act 2013 prohibits a company from directly or indirectly advancing any loan to its director, or to any other person in whom the director is interested, and from giving any guarantee or providing security in connection with a loan taken by such a director or person. The limited exceptions cover loans forming part of the service contract or terms of remuneration of a managing or whole-time director, loans by a company whose ordinary business includes the giving of loans, and specified loans to directors of holding or subsidiary companies. A personal loan to a whole-time director for purchasing a residential flat falls outside these exceptions, so the proposal is prohibited; no board or member resolution can cure the bar.