Vigil mechanism

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Harvinder kumar

Company Secretary

121 Points Posted on 14 July 2016

Dear Friends,

As per section 177(9), a class or classes of companies is required to estabhils an Vigil Mechanism. Further, as per Rule 7, defines such class or classes of companies as follows:

1. The company which accepts public deposit.

2. The company has borrowed from banks/FIs in excess of Rs. 50 crore.

My question is pertaining to point no. 2 above, if a company has crossed the borrowing limit and within few days, said borrowings reduced below the threshold limit, then there is need to establish such mechanism.

just crossing one time the borrowing limit makes mandatory for the given company to establish and keep vigil mechanism forever.

Looking forward to your kind reply please.

Regards,

Harvinder Kumar Dinkar

Company Secretary

Replies (2)

P C Agrawal

Registered independent director Past Ch

5233 Points Posted on 21 July 2016

Rule 7 says "companies which have borrowed...". It means borrowing could be at any point of time. It does not talk of outstanding amount at the end of the year or any other date. Hence vigil mechanism will be applicable even if amount is borrowed for one day.

Harvinder kumar

Company Secretary

121 Points Posted on 22 July 2016

Thanks a lot Sir for your valuable reply in this regard.

May further request to please let me knwo if aforesaid borrowings go up above the threshold limit for one and and comes down next day, even if we need to establish Vigil Mechanism in a Company. Despite of fact that the Company is not going to again crossing the limit.

It does mean that it is only 'one point trigger', once it is triggered, it will be applicable forever.

Regards,

Harvinder Kumar