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Corporate law

Prashanth (Chartered Accountant) (2322 Points)

28 October 2011

Hi,

In CA Final,Corporate law Sec-293 puts restriction on powers of BOD's(i.e.prior approval of Share holders is required) in respect of 5 items i.e.borrowings from banks,Donations etc,Now my question is can we interpeat that for other items other than mentioned in Sec-293 it is not required to take approval from theshare holders?what is the significance of this sec-293?

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8 Replies

G.L.Subhramanian (PCS) (206 Points)
Replied 28 October 2011

Hi Prashanth,

Correct. Only the items mentioned in Section 293 require approval from the shareholders in a general meeting.

The significance of Section 293 is that the all the items mentioned in that section affect company's money. Therefore, approval of the company (shareholders) is required for the Board of Directors to transact the items mentioned in the section.

Regards

Subbu

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Prashanth (Chartered Accountant) (2322 Points)
Replied 28 October 2011

@ G.L. agreed but, in some cases we generally take prior approval of share holders also like appointment of sole selling agent,MD and giving intercorporate loans under sec-372A then why such things are not covered under the sec-293

SkDash (CS (Member) CWA (Final)) (909 Points)
Replied 28 October 2011

all the sections have independent impact and wordings mentioend in one particular section is for that section only. so yr interpretation that "items other than what is mentioned in sec 293 doesnt require shareholder resolution" is not correct. No section has overriding power on other section, unless so mentioned.

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Prashanth (Chartered Accountant) (2322 Points)
Replied 28 October 2011

I too agree @ santosh but they specially said that the following items required prior approval of share holders under sec-293, so the plain reading section tells that for other items does not require approval?

If possible please go through Sec-293 @ Santosh

SkDash (CS (Member) CWA (Final)) (909 Points)
Replied 28 October 2011

prashant- let me give you one simple example.

Lets say, today forecast says- today it will be rain. Does it mean (do you think) that there will be no rain other than today?

Prashanth (Chartered Accountant) (2322 Points)
Replied 28 October 2011

ya got it but ,when the section saying prior approval is required to be taken then in such case all the items which require approval are not included in that section-293,but they mentioned four only like donations,borrowings etc

CA Arindam Dey (Chartered Accountant) (117 Points)
Replied 28 October 2011

It's better if you read Sec. 292 alongside which lists down the powers that are excercisable at Board Meeting. Sec 293 on other hand provides an additional list of activities not undertaken in the 'ORDINARY COURSE OF BUSINESS' for which Shareholder's approval is required. Section 294AA, 372A which you mentioned are different issues altogether and have no bearing on Sec. 293.

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G.L.Subhramanian (PCS) (206 Points)
Replied 31 October 2011

Hi Prashanth,

I got it wrong completely. Agree with Mr.Santosh.

The difference between matters mentioned in 293 and other items for which approval of shareholders is required (say for eg. Increase in authorised capital / name change) is that, under 293, board can exercise their powers only if previous consent is obtained from shareholders whereas for Increase in authorised capital / name change, board recommends those matters but the final approval is with the shareholders.

Regards,

Subbu

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