Sale of a part of business

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deepa (Querist)

21 November 2011 Dear All,

One of client (P) Ltd. Company sold one of his business to some one, is it necessary to obtain the approval of Shareholders if the Articles of Association is silent on the issue.

Please suggest, its urgent

CS Mitesh Mehta

CS Mitesh Mehta (Expert)

21 November 2011 As per section 293(1)(a) of the Companies Act, 1956, Board of directors of a company must obtain the consent of the company in a general meeting, if Board decides to sell, lease or dispose of in any manner-
1) the whole of the undertaking of the undertaking of the company
ii) substantially the whole of the undertaking of the company
iii) if the company owns more than one undertaking, of the whole, or substantially the whole, of any such undertaking.

However Section 293 (1)(a) applies only to public companies and private companies which are subsidiaries of public companies. It does not apply to private companies which are not subsidiaries of public companies.

deepa

deepa (Querist)

23 November 2011 Dear Sir, thanks for the reply. So, since the company is a private limited, can it do the same by just holding a board meeting????????

CS Mitesh Mehta

CS Mitesh Mehta (Expert)

28 November 2011 Yes. Company can do it passing resolution in the Board meeting.

However, for better corporate governance, you can hold general meeting. Since it is a private company, probably members & directors will be the same persons. Holding a general meeting should not be a problem.

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