Sec. 372 A
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Transcript of 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