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Section 180 of ca 2013

Khushboo Maheshwari (Company Secretary) (548 Points)

19 February 2014

There is a query, would request you to please address it.

"A" Company had been awarded two projects. In the Board of A Compnay it was decided that these 2 projects will be taken in a new SPV and accordingly a new wholly owned subsidiary was incorporated “B Limited”. Now the 2 projects will be transferred to this B Limited. Will it amount to sell or otherwise dispose off of an undertaking in A Limited as per section 180 of Companies Act, 2013 and do we need to take approval of Shareholders in the EGM for this? (A Limited right now has a negative networth)

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3 Replies

P C Agrawal (Registered independent director Past Ch) (8229 Points)
Replied 19 February 2014

It is not clear what is meant by 'awarded two projects'. Has the company just received order for execution of these projects? In that case it is not an undertaking. However, if say the company had two existing plants which are to be trnsferred to the WOS, in that case it will be an undertaking and consent ui/s 180 will be required.

Khushboo Maheshwari (Company Secretary) (548 Points)
Replied 19 February 2014

We are into road constructions and the government has awarded construction of two new roads to us which has been transferred to the new SPV

P C Agrawal (Registered independent director Past Ch) (8229 Points)
Replied 19 February 2014

Explanation(i) to Sec.180(1)(a) defines "undertaking" as un undertaking in which the investment of the company exceeds 20% of its net worth as per the audited balance sheet of the preceding financial year or an undertaking which generates 20% of the total income of the company during the previous financial year.

Thus two given criteria are:

1. Investment in undertaking exceeds 20% of net worth as per last audited B/S -- In your case you have not invested anything on the project and hence not applicable.

2. Undertaking generates 20% of total income of company during previous FY -- In your case not applicable since the project is yet to commence.

Since this is not an undertaking, consent u/s 180 is not required.