Section 372A
This query is : Resolved
udit sharma
(Querist)
13 November 2010
Hi....
In reckoning the prescribed limits under section 372A of the Companies Act, 1956 whether the paid up capital and free reserves as they stand at the end of the previous financial year in the Audited Balance sheet should be considered or the amount standing to the credit of the Paid up capital and free reserves on the date on which the proposal to make loan/ give gaurantee/ make investment is considered by the Board????? Please clarify.....
In reckoning the prescribed limits under section 372A of the Companies Act, 1956 whether the paid up capital and free reserves as they stand at the end of the previous financial year in the Audited Balance sheet should be considered or the amount standing to the credit of the Paid up capital and free reserves on the date on which the proposal to make loan/ give gaurantee/ make investment is considered by the Board????? Please clarify.....
Ajay Mishra
(Expert)
13 November 2010
Dear Udit
"Free reserves" means those reserves which, as per the latest audit balance sheet of the company, are free for distribution as dividend and shall include balance to the credit of securities premium account but shall not include share application money.[Explanation to section 372A(10)]
Regards
"Free reserves" means those reserves which, as per the latest audit balance sheet of the company, are free for distribution as dividend and shall include balance to the credit of securities premium account but shall not include share application money.[Explanation to section 372A(10)]
Regards
Message likes :
1 times
udit sharma
(Querist)
13 November 2010
Gud morning Ajay Sir.....
I am of the same opinion that the paid up capital and free reserves as per the latest audited balance sheet of the Company should be taken for reckoning the limits under section 372A. However, our advocate says :
Suppose the Company has issued shares after 31/03/2010 at premium then the premium amount should be added to the reserves for reckoning the limit and the paid up capital as on 31/03/2010 should be taken into consideration......
Is this possible???????
In my opinion both the Paid up capital and free reserves should be as per the Latest Audited Balance sheet! Am i correct or our lawyer please clarify?????
Best Regards
Udit Sharma
I am of the same opinion that the paid up capital and free reserves as per the latest audited balance sheet of the Company should be taken for reckoning the limits under section 372A. However, our advocate says :
Suppose the Company has issued shares after 31/03/2010 at premium then the premium amount should be added to the reserves for reckoning the limit and the paid up capital as on 31/03/2010 should be taken into consideration......
Is this possible???????
In my opinion both the Paid up capital and free reserves should be as per the Latest Audited Balance sheet! Am i correct or our lawyer please clarify?????
Best Regards
Udit Sharma
Ajay Mishra
(Expert)
13 November 2010
Dear Udit
For Free Reserve the section 372A says that it will be taken as per latest audited balance sheet but silent about paid up capital.
My personal views is that if free reserve is taken as per audited balance sheet then paid up capital will also be taken as per latest audited balance sheet.
Regards
For Free Reserve the section 372A says that it will be taken as per latest audited balance sheet but silent about paid up capital.
My personal views is that if free reserve is taken as per audited balance sheet then paid up capital will also be taken as per latest audited balance sheet.
Regards
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Depreciation Chart Companies Act
- EPF ECR NEW FILE SEP 17TH 2026
- Capital Gail Exemption Certificate
- Oct 2025 Invoices
- Import of Software Service.
- SECTION 393(3) TAX ON CASH WITHDRAWAL
- Clarification Requested: Gift → NRO → NRE → Overseas Transfer - USA/CANDA (FEMA & Tax Compliance)
- Under marginal scheme
- Capitalgain tax purposes for valuation report compulsory
- GST on Renting godown to KFCSC for Storage of Raagi
- GST Audit whether Govt Companies are exempt?
- IMPORT PURCHASE ENTRY PASSED IN BOOKS OF ACCOUNT
- FAST DS 26 Undisclosed Foreign Asset Disclosure Scheme 2026
- Regime change
- Goods sold but invoice not issued
- Tally: Imported bank entries do not show up in manual reconciliation
- Sales of goods of amount Rs97 lakhs to a party
- Confused About My Career After 12th — Cyber Security, AI or Finance? Need Guidance
- FAST-DS 2026 Under Tax Law - No recourse or support for person declaring via this scheme?
- Guidance Needed: Linking Multiple Form 26QB Payments and Responding to ITD Defaulter Notice
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
