Limit mentioned in sec 372a

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Anamit Babar (Querist)
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25 November 2013 As per Sec. 372A of Companies Act 1956 Company give guarantee not exceeding 60% of it's paid up capital and Free reserve or 100% of its Free reserve without obtaining the consent of share holder.
My query related to date ie. of which date Capital and free reserve or free reserve are take in to consider.

As per my Companies records,

As at 31st march 2013 - Paid up Share capital are - 30,76,24,000/- and Free Reserve are Nil and

As on Date - Paid up capital - 41,76,00,000/- and free reserve - Nil

then what is the limit under sec.372A Board can give guarantee without obtaining prior consent of share holder.

Ajay Mishra

Ajay Mishra (Expert)
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25 November 2013 Hi

“Free reserve” means those reserves which, as per the latest audited balance sheet of the company, are free for distribution as
dividend and shall include balance to the credit to the security premium account but shall not include share application money. (Paid up capital can be considered as on the date of investment).
(It is not expressly provided that in arriving at the aggregate of the free reserve, the amount of accumulated balance of loss, balance of deferred revenue expenditure and other intangible assets, should be deducted. Capital and debenture redemption reserve is free reserve after redemption of preference shares and debenture respectively.)

Anamit Babar

Anamit Babar (Querist)
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26 November 2013 Thank you very much sir.

As per your reply...
Amount of Free Reserve take in to consider as per Latest audited Balance sheet. and
Paid up capital - as on date of investment

Ajay Mishra

Ajay Mishra (Expert)
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26 November 2013 Yes..................

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