Hello Friends, please help me to find out that
As per Sec 372A(8) the below is one point of exemption to which the provision of this section is not applicable
-To investment made in shares pursuant to sec. 81(1) (a) – Rights shares.
I have a doubt whether this investment by a public company (i.e. in right issue) is counted in investment already made while calculating the limit of 60% ?
Dear Friend
The case given above, attract the provision of section 372A of the Companies Act, 1956 which regulates inter-corporate loans and investments by a company. If the company in question fall in any of the exempted categories of companies stipulated by sub-section (8) of section 372A then it can simply pass a Board resolution for making loan up to 60% to the Company.
Right Issue is the right of the shareholders of taking shares of the company of which they are shareholders, it can not be treated as investment under section 372A.
A special resolution of the shareholders at a general meeting is required since the proposed loan plus the loan and investments already made exceeds the figure of 60%.
Regards
Dear Sir, It would be helpful if you could provide a resolution format for seeking authorization in a general meeting pursuant to Section 372A ?
Item No......:
To consider and if thought fit to pass with or without modification(s) the following resolution as a Special resolution:
“RESOLVED THAT SUBJECT TO THE Provision of Section 372 A of the Companies Act, 1956 as amended from time to time and other applicable provisions of the Companies Act, consent of the shareholders be and are hereby accorded to the Company to make any loans or inter corporate loans, Investments and to give any guarantees or to provide security in connection with a loan --------------- Crores notwithstanding that such investments, outstanding loan given or to be given and guarantees & security provided are in excess of 60 percent of the Paid Up Share Capital and Free Reserves of the Company or 100 percent of the Free Reserves of the Company, which ever is more, as prescribed under Section 372A, as detailed in the attached Explanatory Statement, as they in their absolute discretion deem beneficial and in the interest of the Company.
FURTHER RESOLVED that the Board of Directors (or a Committee formed by them for this purpose), be and are hereby authorized to discuss, negotiate and finalize the terms and conditions of the proposed loans, Inter corporate loans, investment/lending or giving guarantees which they may deem fit in the interests of the Company.”
Explanatory Statement
Item No: -------
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Since the Company may need additional limits to make or inter corporate loans, Investments and to give any guarantees or to provide security in connection with a loan made by any other person to, or to any other person, by Group companies / Companies under the same management / Associate Companies, the limits are to be increased from the existing limit of Rs.---------------Crores which was approved by the Company in the -------------------------- General meeting held on -------------------------- to Rs.-------------------- Crores notwithstanding that such investments, outstanding loan given or to be given and guarantees & security provided are in excess of 60 percent of the Paid Up Share Capital and Free Reserves of the Company or 100 percent of the Free Reserves of the Company, which ever is more, as prescribed under Section 372A, as they in their absolute discretion deem beneficial and in the interest of the Company.
The Board of the Company recommends the resolution for approval by the Members, by exercising their vote.
None of the Directors is interested in this resolution.
Resolution and explanatory statement can be somehow like above edit as per your requirement.
Regards,
CAclubindia
