Sec. 372 A

Sec. 372A

Created by R. SHIVA SHANKARA

Companies Act, 1956

SCOPE

Making a loan Acquiring the securities Giving any guarantee or providing any

securities

Higher Level

Lower Level

Ceiling Limit

60% of the aggregate of paid-up share capital & Free Reserve

OR 100% of free reserves of the company

Higher of the above

Lower Level

Approval of the BoardPrior approvalResolution passed at a Board MeetingCan not be delegatedUnanimous approval

Higher Level

Special resolution in General Meeting

Special Resolution

AGM EGM Postal Ballet

Notice of Special Resolution

Specific limit Particulars of other Body Corporate Purpose Specific Sources of Funding Other relevant details

No Blanket Permission

Notice must specify the specific securities in which the investments are proposed to be made.

Department Circular No. 8/99 dt. 04.06.1999

Relaxation

Board may give guarantee in excess of ceiling limit without passing a special resolution subject to following conditions.

Within 12 months from the date of guarantee

Immediate next AGM or GM

Whichever is earlier

Other Conditions

No default u/s. 58A of Companies Act, 1956 Rate of Interest shall not be less than

prevailing bank rate.

No approval from Financial Institutions

The aggregate of loan, investment, guarantee or security already made & proposed does not exceed 60% of paid-up share capital & free reserve

There is no default in repayment of loan principle and interest.

Not Applicable to

Banking, Insurance & investment company Housing finance company Financing industrial enterprises or infrastructure facilities. Private company which is not subsidiary or holding company of

public company. Right issue Loan or guarantee made by holding company to 100%

subsidiary company Acquisition of shares of subsidiary company

Register u/s. 372A

Name of body corporate Amount, Date, Terms & Purpose Time limit – within 7 days Place – Registered office Rights of Members – inspect & extracts Consequences of default – Rs. 5,000/- and

Rs. 500/- per day

Non-Compliances of Sec. 372A

Transaction void & ineffective. Repayment of the loan. Company & every officer in default shall be

punishable with Fine up to Rs. 50,000/- OR Imprisonment up to 2 years OR both

THANK YOU

R. SHIVA SHANKARA