### Clause (iii) — Company Providing Loans/Guarantees/Security to Others
> Note: This clause is NOT applicable to companies whose principal business is granting loans.
#### Reporting Requirements
Particulars
To Subsidiaries / JV / Associates
To Other Parties
Aggregate amount during the year
✓ Report
✓ Report
Balance outstanding at 31st March
✓ Report
✓ Report
#### Sub-clauses
(b) Terms & Conditions
Whether terms and conditions of loans/guarantees/security are not prejudicial to the company's interest.
(c) Repayment Schedule
Whether a repayment schedule (principal + interest) is stipulated.
Whether repayment/receipts are regular.
(d) Overdue Amounts
If amount is overdue → state total amount overdue for > 90 days.
Whether reasonable steps have been taken for recovery.
(e) Fallen Loans — Renewed or Extended
Whether any loan which fell due during the year was:
Renewed, OR
Extended, OR
Fresh loan taken to settle existing loan
If yes → specify aggregate amount as a % of total loans granted during the year.
(f) Loans Repayable on Demand
Whether any loan was granted repayable on demand or without specifying any terms or period.
If yes → specify:
Amount of such loans as % of total loans
Aggregate amount granted to promoters and related parties [must be disclosed]
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### Clause (iv) — Compliance with Sections 185 & 186
In respect of all loans, investments, guarantees, and security provided:
Whether Section 185 (loans to directors) complied with
Whether Section 186 (loans and investments by companies) complied with
If NOT complied → provide details.
Worked example
### Example 1
Overdue Loan [Clause iii(d)]:
ABC Ltd gave an inter-corporate loan of ₹2 crore to DEF Pvt Ltd. The loan has been outstanding for 120 days and no repayment has been received. Has ABC Ltd taken any recovery steps? No.
Answer: Since the amount is overdue for > 90 days, the auditor must report under Clause 3(iii)(d): total overdue amount is ₹2 crore (> 90 days), and reasonable steps for recovery have NOT been taken.
### Example 2
Loan Renewed to Settle Old Loan [Clause iii(e)]:
XYZ Ltd had given a ₹50 lakh loan to a subsidiary which became due. Instead of collecting it, XYZ Ltd granted a fresh loan of ₹55 lakh to the same subsidiary to repay the old one. Total loans granted during the year = ₹2 crore.
Answer: The auditor must report under Clause 3(iii)(e) that a loan of ₹55 lakh (27.5% of total loans of ₹2 crore granted during the year) was used to settle an existing overdue loan of the same party.
### Example 3
Loans on Demand Basis to Promoter [Clause iii(f)]:
PQR Ltd granted ₹1 crore to its promoter without specifying any repayment period. Total loans outstanding = ₹4 crore.
Answer: The auditor reports under Clause 3(iii)(f) that ₹1 crore (25% of total loans) was granted on demand basis without specifying repayment terms. Aggregate to promoters: ₹1 crore — must be specifically disclosed.
⚠️ Common exam mistakes
Forgetting the N/A exception — Clause (iii) does not apply to companies whose principal business is granting loans (e.g., NBFCs, banks).
Reporting only one direction — students mention 'to subsidiaries/JV/associates' but forget 'to other parties' also need separate disclosure.
Confusing the 90-day overdue threshold with the 6-month threshold for statutory dues (Clause vii) — they are different.
Missing Clause (iv) entirely — students answer Clause (iii) but forget to check Section 185 and 186 compliance under Clause (iv).
Treating 'representation to concerned department' as settling a dispute for overdue amounts — that concept applies to Clause (vii), not here.
Bare-Act text Clauses 3(iii) and 3(iv) · Companies (Auditor's Report) Order, 2020 (CARO 2020) · click to expand
3(iii): whether during the year the company has made investments in, provided any guarantee or security or granted any loans or advances in the nature of loans, secured or unsecured, to companies, firms, Limited Liability Partnerships or any other parties; if so, report: (a) aggregate amount during the year, and balance outstanding at the balance sheet date with respect to such loans or advances and guarantees or security to subsidiaries, joint ventures and associates; (b) aggregate amount during the year and balance outstanding at the balance sheet date with respect to such loans or advances and guarantees or security to parties other than (a) above; (c) whether the investments made, guarantees provided, security given and the terms and conditions of the grant of all loans and advances in the nature of loans and guarantees provided are not prejudicial to the company's interest; (d) whether the schedule of repayment of principal and payment of interest has been stipulated for the loans and advances and whether the repayments or receipts are regular; (e) if the amount is overdue, state the total amount overdue for more than 90 days and whether reasonable steps have been taken by the company for recovery of the principal and interest; (f) whether any loan or advance in the nature of loan granted which has fallen due during the year, has been renewed or extended or fresh loans granted to settle the overdues of existing loans given to the same parties; if so, specify the aggregate amount of such dues renewed or extended or settled by fresh loans and the percentage thereof to the total loans or advances in the nature of loans granted during the year; (g) whether the company has granted any loans or advances in the nature of loans either repayable on demand or without specifying any terms or period of repayment; if so, specify the aggregate amount, percentage thereof to the total loans granted, aggregate amount of loans granted to Promoters, related parties as defined in clause (76) of section 2 of the Companies Act, 2013. 3(iv): in respect of loans, investments, guarantees, and security, whether provisions of section 185 and 186 of the Companies Act have been complied with; if not, provide details thereof.