Sec 292

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A company has made Fixed Deposit in a bank for Rs.6 Crore...what are the implications while conducting an audit vis a vis Section 292 of companies act...is it covered under  "the power to make loans" under Sec 292(1)(e) or u/s sec 292(1)(d) - power to make investments?

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The investment in the form of FD will fall under Section 292(1) (d) of the Companies Act, 1956. Resolution for Investment  must be passed in the Meeting of the Board. 

It's an investment of the Company and at the time of audit you have to insist for original FD receipt issued by the Bank for verification. Also check whether the Board Reolution is passed in the physcial Board Meeting and not passed by Circular Resolution

Originally posted by : Jayashree S Iyer
The investment in the form of FD will fall under Section 292(1) (d) of the Companies Act, 1956. Resolution for Investment  must be passed in the Meeting of the Board. 
It's an investment of the Company and at the time of audit you have to insist for original FD receipt issued by the Bank for verification. Also check whether the Board Reolution is passed in the physcial Board Meeting and not passed by Circular Resolution
Thank You Ms.Jayasree...one further doubt....if in the present case,what if power has been delegated to the CFO by the BoD?again does such delegation happen each year as the delegation is subject to the condition that the amount upto which investment can be made by such delegatee must be specified in the resolution passed for such delegation...

Yes Ajay. You will have to specify the limits of investment in the resolution, if the powers are delegated to the CFO. This is the limit upto which the CFO can make investments under the authority granted to him by the Board. As and when the investment exceeds this limit a fresh board resolution delegating higher limits should be passed. Alternatively the Board may decide to delegate powers upto 6 crores only with the CFO and if the investment exceeds this limit, authority for further investments may be exercised by the Board.

Originally posted by : Jayashree S Iyer
The investment in the form of FD will fall under Section 292(1) (d) of the Companies Act, 1956. Resolution for Investment  must be passed in the Meeting of the Board. 
It's an investment of the Company and at the time of audit you have to insist for original FD receipt issued by the Bank for verification. Also check whether the Board Reolution is passed in the physcial Board Meeting and not passed by Circular Resolution

I would like to add one more point here, resolution must specify the nature of investment.

Thank u Jayashree and Jaideep...

A private limited co.want to subscribe share in a new co. can it do so... if so is there any limitation for subsribing 50%  of share of new co.

If the investment in Dixed Deposit is short term say for 3 months, then also Sec 292 shall be applied?

If the investment in Dixed Deposit is short term say for 3 months, then also Sec 292 shall be applied?


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