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Maximum limit for taking loan by a pub. ltd. co.

Vijith (student) (46 Points)

12 May 2012

Hi frnds,

Plz help me out to resove this issue:

If a public limited company needs to take loan-

Is there any maximum prescribed limit for taking loan; if so what shall be the maximum limit?

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2 Replies

Ankur Garg (Company Secretary and Compliance Officer) (114783 Points)
Replied 12 May 2012

A public company can take loan against the security of its properties.
You have to pass a board resolution to take approval of director for taking loan u/s 292.
Maximum prescribed limit: There is no maximum prescribed limit of borrowing. It depends on the value of properties of the company which can be used as security.

However if the proposed loan is over and above the limit of paid up capital and free reserve then you have to take approval of shareholders through passing special resolution in the general meeting u/s 293(1)(d).

Please read section 292 and 293(1)(d) in this regard.

Thanks

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Kamlesh (Article Assistant) (137 Points)
Replied 12 May 2012

Dear Ankur Sir,

Section 293(1)(d) states that "borrow money after the commencement of this act, where the moneys to be borrowed, together with the moneys already borrowed by the company (apart from temporary loans obtained from the company;s bankers in the ordinary course of busines), will exceed the aggregate of the paid up capital of the company and its free reserves ,that is to say, reserves not set apart for any specific purpose".

Sir my question is which are the loans other than ordinary course of business? Working capital loans will be included or not while caclulating this limit?