Dear Ones
1. Whether sale/ lease of a loss making Business Unit of a Limited Company requires approval of shareholders under section 293(1) (a) ?
2. Whether such loss making unit means an "undertaking" when substantial revenue is generated from other units?
3. Whether lease of substantial assets of such business unit and sale of remaining assets of this unit requires postal ballot ?
Please let me know
Regards
Mahesh
Hi, Mahesh
By an undertaking is meant a business unit in which a company may be engaged as a gainful occupation. It is going concern organism, so to speak and sginifies productivity. It does not consist of mere assets or property. Sale of mere assets or property will not be regarded as sale of undertaking.
[Rustom Cavasjee v. UOI] 1970.
By the cieted case, we can say that for the ques no 2 and 3 postal ballot or members approval is not required. However for que , in my opinion you should go for the postal ballot as the whole business unit is under question.
Regards
Jaideep Pandya
1. Approval of the shareholders is very much required for sale or lease of a business unit (including loss making units) of a limited company as contemplated in Section 293(1) (a) of the Companies Act, 1956.
2. The extent of revenue creation does not determine whether a business unit is an undertaking or not. Even if it's a loss making unit, it falls under Section 293(1)(a) of the Companies Act, 1956.
3. Postal ballot is required for the sale of business unit.
thanks to jaideep and jayshree
mahesh
CAclubindia
