incorporate loans, advances and investments

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shital (Querist)
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07 June 2010 Dear experts,

what are the provisions relating to above mentioned subject in Company Law?

a group company borrowing from another group company more than its paid up capital then would it be illegal? it is shrot-term borrowing for 7 days.will not section 293(1)(d) applicable here? it is a limited unlisted company.

practically, inter corporate deposits register is maintained under section 372A for both the co's (giver and taker). but always a board resolution is passed. please let me know wen a special resolution is required.

please tell me where and how this provisions of 293(1)(d) and 372A get attracted.

i am very confused and in urgent need of help.please explain me as soon as possible..

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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10 June 2010 Section 372A

Applicability;
1. Giving loan to any body corporate
2. Acquiring the securities of another company by way of subscription, purchase or otherwise.
3. Giving security or guarantee to a person who gives a loan to any body corporate

Legal Requirement:
A. Board of Directors' approval
-Prior BoD approval is required compulsorily whilr transacting any of the above transactions.
- All the directors present has to vote in favour compulsorily
- The resolution has to be passed at BoD meeting and not at by circular resolution.

B. Approval by a special resolution;

- Special resolution is required only if amount exceeds the ceiling limites precribed;

Ceiling Limits;
If the amount of money involved is higher of the following, pass a special resolution:
- 60% (paid-up equiry share capital+paid-up preference capital+ free-reserve) or
- 100% pf the free reserves of the company

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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10 June 2010 Section 293(1)(d)

Applicability-
A public company or a private company which is a subsidiary of public company shall not except with the consent of the company in general meeting borrow money in excess of the aggregate of the paid-up capital and its free reserve, i.e reserves not set apart for any specific purpose.

Section 293(1)(d) does not apply to the borrowing by a comapny by way of temporary loans obtained from the company's bankers in the ordinary course of business. i.e loan repayable on demand or within 6 months from the date of such loan

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