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Borrowings exceeds the limit

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Querist : Anonymous

Querist : Anonymous (Querist)

22 February 2013 A listed company, borrowed the funds more than aggregate of paid up capital and free reserves without obatining the approval of members. What are the remedies available to the company in this regards?

Is compounding a only option?

Whether supplier credit, Deferred tax and loan from related parties to be taken into account while calculating the borrowings of the company?

Thanks in advance.

CS Advocate Abhishek Goyal

CS Advocate Abhishek Goyal (Expert)
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22 February 2013 In my opinion, you may still ratify the same by obtaining members consent in general meeting.
In this regard, please mind sub section (5) of section 293(1)(d)of the Act which provides that no debt incurred by the company in excess of the limit imposed by clause (1)(d) shall be valid or effectual, unless the lender proves that he advanced the loan in good faith and without knowledge that the limit imposed by that clause had been exceeded.

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