On 3rd November 2025, the Ministry of Corporate Affairs (MCA) issued a significant notification — G.S.R. 811(E) — introducing the Companies (Meetings of Board and its Powers) Amendment Rules, 2025. This amendment brings an important clarification to the scope of business activities covered under the expression “business of financing industrial enterprises” in section 186 of the Companies Act, 2013. This change may appear technical, but it has real implications for Non-Banking Financial Companies (NBFCs) and Finance Companies operating within International Financial Services Centres (IFSCs) in India.
Background: Section 186 and Rule 11 of the 2014 Rules
Section 186 of the Companies Act, 2013 governs loans, investments, guarantees, and security provided by companies. It sets limits and conditions to ensure corporate transparency and prevent misuse of funds through related party transactions or excessive inter-corporate loans.
However, the law also recognizes that some companies—especially those engaged in financing—must give loans or guarantees as part of their ordinary business activities. To that end, Rule 11 of the Companies (Meetings of Board and its Powers) Rules, 2014 defines what qualifies as the “business of financing industrial enterprises.”
Until now, this definition lacked clarity for different categories of financial institutions, particularly NBFCs and Finance Companies operating under the IFSC framework. The 2025 amendment directly addresses this gap.
Key Amendment: What Has Changed
The new rule substitutes sub-rule (2) of Rule 11 with a detailed definition of “business of financing industrial enterprises.” It now explicitly includes:
- For NBFCs registered with the Reserve Bank of India (RBI):
The phrase covers “the business of giving any loan to a person or providing any guarantee or security for due repayment of any loan availed by any person in the ordinary course of its business.”
o This clarification ensures that NBFCs’ core lending and guarantee activities are recognized under the Act as legitimate financing operations. - For Finance Companies registered with the International Financial Services Centres Authority (IFSCA):
The rule includes “activities as provided in sub-clause (a) or sub-clause (e) of clause (ii) of sub-regulation (1) of regulation 5 of the IFSCA (Finance Company) Regulations, 2021.”
o Essentially, this aligns the Companies Act with the IFSCA regulatory framework, allowing finance companies in IFSCs to operate without ambiguity regarding their lending and guarantee functions.
Why This Amendment Matters
This clarification brings several benefits:
• Regulatory Alignment: It harmonizes the Companies Act with the frameworks of both the RBI and IFSCA, reducing compliance uncertainty.
• Operational Clarity for Financial Entities: NBFCs and IFSC-based finance companies can confidently undertake their financing operations without fear of violating section 186.
• Ease of Doing Business: By defining the scope of permissible financial activities more clearly, the amendment supports India’s ongoing push for a more transparent and efficient corporate regulatory environment.
In Conclusion
The Companies (Meetings of Board and its Powers) Amendment Rules, 2025 may seem like a minor technical update, but its impact is significant. By providing a clearer definition of the “business of financing industrial enterprises,” the MCA has eliminated a long-standing ambiguity for NBFCs and IFSC-based finance companies.
In an evolving financial landscape, such targeted amendments help ensure that India’s corporate laws remain both relevant and supportive of legitimate business operations—strengthening regulatory consistency while promoting economic growth.