Sec. 180

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Ankush Munjal (Querist)

02 March 2015 QUERY ON CO.'S ACT 2013 wrt SEC. 180

FACTS:

A private Ltd. Co. has taken an ICD of Rs. 10 crore from its subsidiary co. in Nov’2013.

As per Sec. 180 of Companies Act, 2013 which was notified on 12.09.201, CO. TO PASS special resolution in gen. meeting of members

Hence provisions of this section are attracted but company has not passed the special resolution & hence not complied with the explicit provisions of Co.’s Act 2013.

The earlier corresponding section 293 and the new section 180 pertained to powers of the Board of Directors which can be exercised only at a general meeting by way of special resolution to be passed for the purpose. Section 293(1)(d) pertained to borrowing powers of the companies i.e. the amount upto which the companies could borrow was laid down in the special resolution which was approved by the members in the general meeting. Companies are allowed to borrow any sums of monies upto the paid up share capital and free reserves of the company. Any borrowal in excess of the combination of these two limits i.e. paid up share capital and free reserves required approval of the members in the general meeting by way of special resolution. Typically companies passed an omnibus resolution securing approval for Rs.X amount which was way above the paid up share capital and free reserves of the company but sufficient for the purposes of the company.

Section 293 of the Companies Act, 1956 was applicable only to public companies i.e. private limited companies were exempted from this requirement and therefore they could borrow any sums of money upto any limit without the need of seeking any approval from the members of the company. Now Section 180 is applicable to all companies i.e. public as well as private. So now onwards even private companies have to seek the approval of their members if they are intending to borrow monies in excess of their paid up share capital and free reserves.
QUERY:

Now what should this co. do (as sec. 180 applicable from Sep'13 & ICD taken from subsi. co. in Nov.'13) as regards this ICD taken from subsidiary co. Co. had although passed resolution in board u/s 293(1)(d) in this regard as a good corporate governance practice (although not statutorily reqd. to be passed by a pvt. ltd. co.)