Inter-Corporate Loan, Guarantee and Investment Limit Calculator — Section 186
Reviewed by Finin2min Editorial Desk · Last reviewed 11 August 2026
Calculate the higher of 60% of paid-up capital plus free reserves and securities premium or 100% of free reserves plus securities premium.
Calculate section 186 limit
Exemptions for banking, insurance, housing finance, infrastructure and ordinary-course activities require separate review.
Ordinary statutory limit
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Headroom before proposal
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Post-proposal aggregate
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Special resolution
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How This Is Calculated
Section 186 caps a company's inter-corporate loans, guarantees and investments at the higher of 60% of (paid-up capital + free reserves + securities premium) or 100% of (free reserves + securities premium) — exceeding this ordinary limit requires a special resolution before the transaction proceeds.
Frequently Asked Questions
What is the Section 186 limit for inter-corporate loans and investments?
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The higher of 60% of (paid-up share capital + free reserves + securities premium account) or 100% of (free reserves + securities premium account) — whichever of these two calculations gives the larger figure becomes the applicable ordinary limit.
What happens if a proposed inter-corporate loan exceeds this limit?
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A special resolution (requiring higher shareholder approval than an ordinary resolution) is required before the company can proceed with a loan, guarantee or investment that would take the aggregate beyond the ordinary Section 186 limit.
Confirm the current, in-force text governing Inter-Corporate Loan, Guarantee and Investment Limit Calculator — Section 186 on the official source linked above - the summary on this page is an implementation aid, not a substitute for it.
Record the exact event/transaction date, since the applicable version of the law, form or threshold can change between the date of the underlying event and today.
Preserve the primary documents (notices, applications, orders, acknowledgements) that would let a reviewer reconstruct how the facts were classified and what was actually done.
Check for a State-specific rule, later amendment or binding judicial decision that may modify how this applies on your facts.
Before relying on this page
This page is a structured implementation summary, not the operative legal text. Portal or process acceptance of a filing does not by itself establish legal compliance - the underlying classification, authority, evidence and timeline still have to be independently correct. Where the facts are contested, high-value, or time-barred if delayed, verify the current position with the official source and, where appropriate, a qualified professional before acting.
Scope: Computes the permissible limit for inter-corporate loans, guarantees, security and investments under Section 186 of the Companies Act, 2013, and checks the applicable board/shareholder approval route.
Calculation logic
General limit: aggregate of loans made, guarantees/security given, and investments made by the company (in any other body corporate, taken together across all such transactions) cannot exceed the higher of (a) 60% of paid-up share capital, free reserves and securities premium account, or (b) 100% of free reserves and securities premium account.
Where the proposed transaction, together with existing outstanding loans/guarantees/security/investments, would exceed this limit, prior approval by special resolution of shareholders is required (in addition to the board resolution that is mandatorily required for any such transaction regardless of value) — the calculator flags this escalated approval requirement where the limit is breached.
Interest rate on inter-corporate loans must not be lower than the prevailing yield of the currently prescribed government security of comparable maturity — the calculator flags this floor rate requirement as a separate condition from the aggregate-limit computation.
Inputs and assumptions
The 60%-of-capital-and-free-reserves / 100%-of-free-reserves alternative limit computation, and the government-security-yield interest floor, follow the current Section 186 provisions.
Loans/guarantees/investments to a wholly owned subsidiary, or (for guarantees/security) in respect of a loan made by a bank/financial institution to a subsidiary, are exempt from the Section 186 limit (though board resolution and specific disclosure requirements still apply) — the checker applies this exemption where the user indicates a wholly-owned-subsidiary transaction.
Exclusions and edge cases
A company cannot make investments through more than 2 layers of investment companies (subject to specific exceptions), a separate structural restriction under Section 186(1) — the checker addresses the value-limit computation; the layering restriction is a distinct structural check the user should separately verify for complex holding structures.
This checker is scoped to inter-corporate transactions under Section 186 — loans/guarantees/security specifically to a director or director-connected entity are instead governed by the separate Section 185 provisions, addressed by the Loan to Director Checker.