Approval of list of creditors
S. 291-Approval of list of creditors-Board Resolution
"RESOLVED that payment
be and is hereby authorised to be made to the creditors of the Company as set
out in the list of creditors placed before the meeting, and initialed by the
Chairman for the purpose of identification."
PRACTICE NOTES
1. Approval of list of
creditors.-It is common for large companies with a large number of
creditors to place a composite list of creditors before the Board and obtain
consent for payment to them.
Co-availing service of an executive
S. 291-Co-availing service of an executive-Board
Resolution
"RESOLVED that the services of Mr. DMK, a Senior Technician employed by the Company, be made available to the under-noted companies with effect from the 2002 , on terms that all expenses on account of his remuneration, perquisites, entitlements, benefits (expressed in terms of money), as may from time to time, be applicable, be shared equally by M/s. PQR & Company Limited M/s. BNP & Company Limited. M/s. SVP & Company Limited.
PRACTICE NOTES
1. Co-availing service
of a person.- Sometimes it may become necessary to lend technical service of a
person employed by a company and an arrangement may be worked out for the
recovery from the other companies by the appointing company all the expenses in
relation to such Technician for sharing among all the companies equally, or on
the basis of time utilised.
2. Sharing of remuneration by companies co-availing service not
applicable for tax-free foreign technician.-The sharing of remuneration by several companies coavailing the
service of a Technician will not, however, be applicable in the case of a
taxfree foreign Technician pursuant to section 10(6)(viia) of the Income-tax
Act, 1961.
3. Presumption of common control.-Such co-sharing
may raise the presumption of common control.
Submission of a dispute before an arbitrator
S. 291-Submission of a dispute before an arbitrator-Board
Resolution
"WHEREAS
a letter dated the 2002, from the Chief
Engineer Project, Government of India
(a Project which the company has
undertaken to construct on turnkey basis) disagreeing with the company's
contention for a wage escalation due to introduction of the Gratuity Act was
received;
AND
WHEREAS the company's liability there for, was tabled before this meeting;
NOW
THEREFORE IT IS RESOLVED that the matter be and is hereby referred to the body
of the arbitrators, pursuant to the terms of clause of the agreement between the company and the Government of India
through the Chief Administrator . Project, Ranchi, for arbitration over the
claim of the company in respect of wage escalation.
RESOLVED
FURTHER that Mr. KKW, a Director, and Mr. SND, the Chief Engineer of the
Company, be and are hereby authorised jointly to represent the Company's
contentions before such body of arbitrators the composition of which had been
earlier agreed upon by the Company."
PRACTICE NOTES
1. Scope of general powers of Board.-The general power of the Board consists
of all such powers and all such acts and things as the company is authorised to
exercise and do either under the Companies Act, 1956, or the Articles of Association of the company. For the
exercise of certain powers, the Companies Act, 1956, is silent. They could be validly exercised by the Board of
Directors. The Board, in such cases, should observe the directions given in the
memorandum of articles of the company and also any such directions made by the
company in General Meeting. However, no regulation, made by the company in
General Meeting shall invalidate any prior act of the Board which would have
been valid if that regulation had not been made.
2. Reference to Arbitration.-In view
of the mandatory provisions of section 8 and
section 45 of the Arbitration and Conciliation Act, 1996 once it is established that the matters agitated in a petition
under section 397/398 arise out of or
in connection with an arbitration agreement, then the Company Law Board has to
refer the parties to arbitration. Bhadresh
Kantilal Shah v. Magotteaux International, (2002) 111 Com Cases 220 (CLB).
Arbitration in Government contracts
S. 291-Arbitration in Government contracts-Board Resolution
"WHEREAS disputes have arisen between the Company and the Government
of India represented by the Chief Engineer Project in respect of the
implementation of several clauses in the agreement No. ..... ...... dated between the company and the
Government of India represented by the aforesaid Chief Engineer.
NOW IT IS RESOLVED that the disputes aforesaid be and are hereby submitted to arbitration in accordance with clause of the afore said agreement.
IT IS FURTHER RESOLVED that Shri ……be and is hereby nominated as the arbitrator by the Company."
PRACTICE NOTES ……
See under Resolution No. § 606.
Gratuity payable to staff
S. 291-Gratuity payable to staff-Board Resolution
"WHEREAS the Board
noted that the Gratuity Act being applicable to the Company, it would be a
liability of the Company to pay gratuity to such staff as are covered under the
said Act, on retirement from the services of the Company;
NOW THEREFORE IT IS RESOLVED
that an assessment of liability of the Company for payment of gratuity on
accrual basis as at 31st March, .... by a qualified actuary, be and is hereby
made.
RESOLVED FURTHER that a fund, pursuant to a scheme, under a deed of trust, a copy whereof authenticated by the Chairman, was placed at this meeting, be and is hereby approved and that Mr ……Director, and Mr ……the Finance Manager, and Mr ……an employee of the Company, be the first trustees of the aforementioned Gratuity Fund of the Company.
RESOLVED FURTHER that the
seal of the Company be affixed to the deed of trust as hereinbefore approved
and expressed to be made between the said trustees on the one part and the
Company on the other part in presence of Mr. JKW and Mr. VKW, the Directors of
the Company, pursuant to Article.... of the Articles of Association of the
Company."
PRACTICE NOTES
1. Payment of gratuity.- Option is
open to the company to make payment as and when actual liability arises so that
gratuity is provided on cash rather than accrual basis.
2. Provision for gratuity
liability in the books of accounts-Section 209(3)(b)
of the Companies Act, 1956 provides that 'proper books of account shall not be
deemed to be kept with respect to the matter specified therein, if such books
are not kept on accrual basis and according to double entry system of
accounting'. It is mandatory for companies to provide for gratuity liability in
their books of accounts in accordance with the provisions of section 209(3)(b)
of the Companies Act, 1956, taking into account the Accounting Standard 15
(Accounting for Retirement Benefits in the Financial Statements of Employers)
of the Institute of Chartered Accountants of India. [Circular No. 3198, issued by Ministry of Law, Justice and Company
Affairs, Department of Company Affairs, vide no. 5/10/98-CL. V, dated 18
May, 1998].
Revocation of authorisation to operate a bank account
S. 291-Revocation of authorisation to operate a bank account-Board
Resolution
"RESOLVED that Mr , a Director of the Company, and Mr ……senior executive of the Company, having resigned from their respective posts in the company, the authority conferred on the said Mr. PKW and Mr. MPZ to operate the bank account of the Company vide Board Resolution, dated the ……2002 be and is hereby revoked and that the Company's bankers Bank . Branch, Nagpur 440012 be advised accordingly.
RESOLVED FURTHER that the
Bank be and is hereby advised to treat - all documents, cheques, negotiable
instruments or any other documents or orders signed by the aforesaid Director
and the senior executive and pending before the aforesaid date of revocation of
authority but not presented to the bank or not paid or remaining pending as on
the date of revocation, be treated as valid and binding on the company, and
that the Company agrees to accept as valid any such documents retained, paid or
negotiated even subsequent to the aforesaid date of revocation of authority.
RESOLVED FURTHER that a copy
of this resolution be sent to the Bank for notification duly certified under
the signature of the Chairman hereof."
PRACTICE NOTES
1. Changes in list of signatories authorised to operate Bank Account be
advised to bank.-The Bankers of the company
should be forthwith advised the changes in the list of signatories authorised
to operate bank account. In a big company, sometimes executive turnover is
high, and the Secretary should advise the Board to adopt appropriate resolution
rescinding the bank account operation of the executives concerned for the
safety of the company.
2. Advice to bank to honour cheques/bills pending on date of revocation
of authority.-In practice, it is found that
cheques/bills of exchange/other documents/ I instruments to pay' remain pending
on the date of revocation of authority. The bank should be clearly advised that
all instruments signed by the persons concerned before revocation of authority
but not paid or remaining pending for reasons whatsoever should be honoured by
the bank to avoid chaos and confusion.
3. Resolution be passed by circulation.-This resolution
may be passed also by circulation. (Explanation 11 to section 292).
Payment of salaries
S. 291-Payment of salaries to employees-Board Resolution
"RESOLVED that the payment of salaries to the
workers and officers of the Company be made in accordance with the schedule
placed before the meeting and initialed by the Chairman for purposes of
identification."
PRACTICE NOTES
See under Resolution No. 606.
Payment of bonus to employees
S. 291-Payment of bonus to employees-Board Resolution
"WHEREAS there exists
an allocable surplus computed under the provisions of sections, 4, 5 and 6 of
the Payment of Bonus Act, 1965;
AND WHEREAS it has been mutually agreed that per cent of such allocable surplus would be applied for Payment of bonus to the employees;
NOW THREFORE IT IS RESOLVED that Bonus to the extent of ................ of the gross wages and dearness allowance be paid to every employee in respect of the immediate preceding accounting year ending on 2002 within 2002 and that the balance of Rs . ……be carried forward as 'set on' under section 15 of the Payment of Bonus Act, 1965."
PRACTICE NOTES
1. Eligibility for Bonus.-Section 8
of the Payment of Bonus Act, 1965 states that every employee shall be entitled
to be paid by his employer in an accounting year, bonus in accordance with the
provisions of the Act provided he has worked in an establishment for not less
than thirty working days in that year. Thus in order that one employee can
claim bonus he has to work for thirty days in a year. According to section 2(B)
an employee has been defined to mean other than an apprentice employed on a
salary or wage not exceeding Rs. 2500/- per month in any industry to do
skilled or unskilled manual, supervisory, managerial, administrative, technical
or clerical work of hire or reward whether the term of employment be express or
implied. However as per section 9 of the Act an employee shall be disqualified
from receiving bonus if he is dismissed from service for fraud, or riotous or
violent behavior while on the premises of the establishment or theft,
misappropriation or sabotage of any property of the establishment.
Definition of allocable surplus.-Sub-section (4) of section 2 of the Payment
of Bonus Act, 1965 defines "allocable surplus to mean in relation to an
employer, being a company other than a banking company which has not made the
arrangements prescribed under the Income-tax Act for the declaration and
payment within India of the dividends payable out of its profits in accordance
with the provisions of section 194 of that Act, sixty-seven per cent of
the available surplus in any accounting year and in any other case, sixty per
cent of such available surplus.
The definition covers a
company which has not made arrangements prescribed under the Income-tax
Act for the declaration and payment within India of the dividends payable out
of its profits in accordance with the provisions of section 194 of the Act. The
allocable surplus for such a company is sixty-seven per cent and for
other it is sixty per cent of the
available surplus. In other words allocable surplus is the share of workers out
of the surplus available.
Payment of maximum bonus.-Section II
of the Act states that where in respect of any accounting year referred to in
section 10 the allocable surplus exceeds the amount of minimum bonus payable to
the employees under that section the employer shall in lieu of such minimum
bonus be bound to pay to every employee in respect of that accounting year
bonus which shall be an amount in proportion to the salary or wages earned by
the employee during the accounting year subject to a maximum of twenty per cent
of such salary or wage.
2. Payment of additional bonus.-No additional
bonus can be paid until allocable surplus does not exceed the minimum bonus.
Payment of minimum bonus
S. 291-Payment of minimum bonus-Board Resolution
"WHEREAS the Company
has earned a small profit after
charging and adjustment of all working expenses and bad and doubtful debts and
depreciation;
AND WHEREAS, there is a
deficit of 'allocable surplus' if computed for the purpose of the Payment of
Bonus Act, 1965 and whereas, it has
been made compulsory to pay a flat amount of Rs. 500/- to each employee of the establishment/factory as annual
bonus;
NOW THEREFORE IT IS RESOLVED
that a sum of Rs …… (Rupees only) be
paid as bonus to all the employees whether employed in the factory, branches
or in the head office as annual bonus under the Payment of Bonus Act, 1965, so that each employee gets a gross
amount of Rs. 500/- as bonus
irrespective of his/her annual earnings and the percentage thereon.
RESOLVED FURTHER that the
deficit indicated by 'set off' under section 15 of the aforesaid Act be carried forward for adjustment with the
next year's allocable surplus if there be any."
PRACTICE NOTES
1. Payment of minimum bonus.-According to
section 10 of the Payment of Bonus Act, 1965 ev,-,ry employer shall be
bound to pay to every employee who has worked in the establishment for all the
working days in respect of the accounting year a minimum bonus which shall be
8.33 per cent of the salary or wage earned by the employee during the
accounting year or one hundred rupees whichever is higher whether or not the
employer has any allocable surplus in the accounting year.
However, when an employee
has not completed fifteen years of age at the beginning of the accounting year,
the provisions of the section shall have effect in relation to such employee as
if for the words "one hundred rupees" the words "sixty"
rupees were substituted.
2. Profit sharing concept.-There had
been a basic change of concept of the profit sharing bonus which was amended to
provide linkage with the productivity of the factory or productive units of the
company. The matter resulted in number of controversies which have not, it
appears, been finally solved.
Export promotion tour
S. 291-Export promotion tour-Board Resolution
"WHEREAS the Company
holds a 'blanket permit' to visit the foreign customers at any time, such
permit having been issued by the Reserve Bank of India;
AND WHEREAS Mr. TNT is one
of the approved representatives, as mentioned in the Schedule of
Representatives attached to the aforesaid permit;
AND WHEREAS, it has become
necessary to have technical discussion with the prospective customers in the
United Kingdom and the continent, in connection with export of Company's
products;
NOW THEREFORE IT IS RESOLVED
that Mr. TNT be and is hereby authorised to proceed to the United Kingdom and
Continent for the purpose of disposal of technical queries raised by the
prospective customers in those countries and that the authority given for the
release of rupee equivalent to f 500 besides buying an air ticket for Mr. TNT
as per the itinerary prepared by him be approved.
RESOLVED FURTHER that the
Board hereby agrees to abide by all the acts and actions to be taken by the
said Mr. TNT in the course of his duties, who shall, however, submit a full
report to the Board of Directors about the outcome of his negotiations with all
the customers."
PRACTICE NOTES
1. Blanket Exchange permit by RBI-The Reserve
Bank of India, on application made by a company or concern having export
business, may issue 'blanket exchange permit' to such exporting company indicating
therein the names of the representatives of the company who may meet foreign
customers. The holders of such permits, which are generally issued on an annual
basis, may draw exchange from authorised dealers for approved purposes without
obtaining prior approval of the Reserve Bank of India each time.
Resignation of a Director
S. 291-Resignation of a Director-Board Resolution
"RESOLVED that while
expressing sincere appreciation of the Board for the efficient and matured
advice of Mr to this company during the tenure of his office as a Director of
the company, that his resignation be and is hereby accepted being effective
from ……2002 ……as per his letter dated
the 2002 ……which is produced before
this meeting."
PRACTICE NOTES
1. Resignation of Director.-On a
Director vacating his office on the Board, the company is required to file a
return in duplicate in Form No. 32, pursuant to section 303 of the Companies
Act, 1956. At the discretion of the
Board, resignation may be accepted with effect from the date of resignation
letter submitted to the Board by the Director concerned or may be accepted at
the Board meeting from the date of the meeting. Form No. 32 should, however, be
filed with the Registrar of Companies within thirty days from the date of resignation
or acceptance thereof whichever is later. The letter of resignation from a
Director may be in a very simple form reading as follows:
"I hereby tender my resignation from the Board
with immediate effect (with effect from )
and shall be obliged if the same be accepted from the date hereof (from that
date)."
2. Resignation of Managing/Whole-time Directors.-Resignation of Managing Directors/Whole-time Directors being governed by
agreement with the company in regard to terms and conditions of appointment
should be in accordance with those terms. Resignation as Managing Director does
not ipso facto lead to resignation as
Director. Resignation of a director takes effect from the date of resignation.
S.R Shankar v. Amman Steel Corporation,
(2002) 110 Com Cases 50 (Mad).
3. Withdrawal of resignation by a Director.-Resignation of a Director can be withdrawn by him at any time before the
resignation takes effect. Union of India
v. Gopal Chandra Misra, AIR 1978 SC
694.
"RESOLVED that the service of Mr ……the Managing Director of the Company, be dispensed on and from the expiry of three months from date and that the said Mr. TKK be also given the option to tender his resignation from the Board of Directors with effect from any date earlier than the period of the said three months."
PRACTICE NOTES
1. Cessation of Managing Directorship.-If the
Board is not satisfied with the Managing Director's services, it can ask such
Managing Director to resign from the membership of the Board. The termination
of the agreement appointing him as a Managing Director may be initiated by the
Board on the same line as for any other officer of the company. On ceasing to
be a Managing Director, there is no automatic cessation as a member of the
Board. Of course, the company should, within thirty days from such cessation of
the Managing Directorship, file a return in duplicate in Form No. 32 notifying
the change to the Registrar of Companies.
Dismissal of employee
S. 291-Dismissal of employee-Board Resolution
"RESOLVED that Shri ……the Assistant Manager (Finance) of the Company be and is hereby relieved of his duties and is terminated from service with effect from (or forthwith)."
PRACTICE NOTES
1. Delegated by the Board.- Generally the powers of the
Board of Directors of any Company to terminate the services of the employees
other than principal officers of the company are delegated to the senior
executives of the company and in such a case passing a board resolution for
terminating the services of any employee is not needed.
Resignation from the services by the Whole-time Director/General
Manager/Secretary
"RESOLVED that Mr. SSG,
a whole-time Director of the Company, be and is hereby released with
immediate effect after waiving the condition of requiring him to give three
months' prior notice before leaving the services of the Company, such waiver
being permissible in terms of the agreement between the Company and Mr. SSG and
that all the dues payable to Mr. SSG, as per terms of the agreement, be settled
and that the Secretary of the Company be instructed to convey the thanks of the
company to Mr. SSG, the General Manager, for carrying out his duties for long
years diligently and faithfully."
PRACTICE NOTES
1. Board not competent to waive notice period.-If the
amount of salary for three months in lieu
of notice is already payable and is a debt due to the company, the Board
would not be competent to waive the notice for the waiver of notice would
amount to remission of debt within the meaning of S. 293(l)(b) which requires a
General Body resolution.
2. Board competent to waive notice period where person concerned not a
Director.-Board alone would, however, be
competent where the person concerned is not a Director.
3. Waiver permissible in terms of agreement.-Agreement must
permit waiver.
Nomination of director in another Company
"WHEREAS the Company is
a member of M/s. XYZ & Company Limited;
AND WHEREAS, the Company
desires to propose the appointment of Mr
……a Director of this company on the Board of M/s. XYZ & Company
Limited;
AND WHEREAS, the Company for
the aforesaid purpose intends to serve a notice pursuant to section 257(l) of
the Companies Act, 1956, signifying the candidature of Mr. VKW for the office
of Director in the ensuing Annual General Meeting of M/s. XYZ & Company
Limited to be held on the ……2002 , the text of the notice pursuant
to section 257(l) of the Companies Act, 1956, being produced hereunder at this
meeting;
NOW THEREFORE IT IS RESOLVED
to serve a notice under section 257 in this behalf and that the Secretary be
authorised to serve notice to the said M/s. XYZ & Company Limited in
respect of such appointment and also to make a deposit of Rs. 500/- with
XYZ & Co. Ltd. as required under the said section."
PRACTICE NOTES
1. Nomination of representative on the Board of another Company.-A company
who is a substantial shareholder of another company may appoint one of their
representatives on the Board of the latter company. Such representative may be
selected by the shareholding company by a Board Resolution.
2. Circulation of notice of
nomination to members.-Pursuant to
sub-section (I A) of section 257, the
company receiving such notice must circulate the notice to the individual
members for their consideration in the ensuing General Meeting. To avoid time
and expenses of serving individual notice, the company may circulate such
notice at least seven days before the meeting by advertising at least in two
newspapers circulating in the concerned place.
Authority to solicitors/lawyers to initiate action on behalf of company
"WHEREAS there had been
infringement of certain copyrights of which the Company is the registered user;
AND WHEREAS considering that
such infringement may hamper business interest of the Company;
NOW THEREFORE IT IS RESOLVED
that M/s. BPC & Company, the solicitors of the Company, be and are hereby
authorised to initiate action, give notice and take any other legal action as
they may consider proper and, if necessary, institute any legal proceedings in
this behalf."
PRACTICE NOTES
1. Authorisation to Solicitors/Lawyers to initiate action on behalf of
Company.- This is an executive authority vested in the Board which is
usually invoked either by the Managing Director or a committee of Directors.
Appointment of lawyer on retainer ship basis
S. 291-Retainership to a lawyer as a lump sum fee-Board
Resolution
"RESOLVED that M/s be appointed as Lawyers for the Company on and from at a retainer ship of Rs . perquarter."
PRACTICE NOTES
See under Resolution No. 606.
Authorisation to Secretary to handle legal action
S. 291-Authorisation regarding legal action-Board
Resolution
"RESOLVED that Mr.
A.B., Secretary of the Company be and is hereby authorised to institute or
defend legal proceedings, civil or criminal, for and on behalf of the Company
and for this purpose, to verify, sign, affirm and/or present pleadings,
petitions, affidavits, statements and vakalatnamas, engage counsel and tender
evidence both oral and documentary in this connection."
PRACTICE NOTES
Same as given under Resolution No. 606.
Settlement of legal dispute
S. 291-Auth.orityfor settlement of legal dispute-Board
Resolution
"RESOLVED that the legal dispute between XYZ Ltd. and the Company pending as civil suit No . ……on the file of Court, be and hereby is settled on the following terms namely:
RESOLVED FURTHER that Shri
AB, the Secretary of the Company be and is hereby authorised to sign all
necessary papers to enable the company's lawyers to obtain a consent order of
the court on the basis of the above settlement."
PRACTICE NOTES
Same as given under Resolution No. 606.
Authorisation to Managing
Director to incur capital expenditure
S. 291-Authorisation to Managing Director to incur capital
expenditureBoard Resolution
"RESOLVED that Mr.
A.B., the Managing Director of the Company, be and is hereby empowered to incur
expenditure of a capital nature, subject to a maximum limit of Rs ……during one
financial year."
PRACTICE NOTES
1. Authorisation to Managing Director to incur capital expenditure.-Without
a resolution to this effect, the Managing Director, unless his agreement or
the resolution appointing him empowers to this effect, cannot incur capital
expenditure without the concurrence of the Board.
Revaluation of fixed assets
Ss. 291/210-Revaluation of fixed assets-Board Resolution
"RESOLVED that the
fixed assets of the Company, mentioned below, being unrepresentative of the
value these can fetch under the prevailing market price, especially the land
and buildings which were acquired and constructed, be and are hereby revalued
as per the recommendation of M/s. DBC & Company, the valuers and
architects, who were appointed some months back and whose valuation report is
hereby tabled and accepted:
Situated at Present book Revised
value Value
Rs. Rs.
1. Land under Dag No 4,00,000 20,00,000
measuring
2.
Land under Dag No 6,50,000 34,00,000
Measuring
RESOLVED FURTHER that the appreciation as above over book value be transferred to Capital Reserve Account of the Company and that such reserve should not be utilised until such measures are taken as are provided in article ... of the Articles of Association of the Company .
PRACTICE NOTES
1.
Interpretation of Capital Reserve.-In Clause
(c) of paragraph 7 of Part III of Schedule VI of the Act it is stated that
capital reserve shall not include any amount regarded as free for distribution
through the profit and loss account.
2. Utilisation
of revaluation of assets.-For listed
companies the reserve created out of revaluation of assets cannot be used for
issue of bonus shares.
Resolution constituting attorney
for signing pleadings and representing the company in legal proceedings
"RESOLVED that Mr.
A.B., the Works Manager of the Company be and is hereby authorised to sign and
execute pleadings, engage counsel, give evidence and to do all other acts
necessary in connection with the proposed litigation to be filed by the Company
against M/s. Y and Co. Ltd."
PRACTICE NOTES
Authorisation to an employee to sign pleading and to represent Company
in litigation.-Generally the Directors of the company
as its principal officers would represent the company in its litigation. They
can, however, delegate this duty to one of its other employee on the above
terms.
Performance
guarantee/guarantees for advance against contract
S. 291-Performance guarantee/guarantees for advance against
contract Board Resolution
"RESOLVED that the Company's bankers . Bank Branch, Nagpur 440 012, be and is hereby requested for the issue of a guarantee for rupees twenty-five lakhs in favour of Heavy Corporation, Hardwar, U.P., incorporating in the said guarantee certain specific terms, as may be required by the said Corporation, for the purpose of negotiating a contract with them for commissioning on turnkey basis a chemical plant by ……2002 for a contracted amount of Rs. 5.50 crores, the terms and details of which are incorporated in the draft agreement to be entered into between the Company and the Corporation, and submitted to this meeting.
RESOLVED FURTHER that Mr ……and Mr ……the Directors of the Company, be and are hereby jointly authorised to execute and sign such counter- guarantee for an equivalent amount in favour of the Bank, in the form as required by the said Bank."
PRACTICE NOTES
1. Request to Bank for issuance of guarantee.-Issue of
guarantee by banks in favour of a customer of a company is a common feature,
and usually a limit up to which total guarantees may be issued in favour of
different customers is negotiated within the overall credit limit granted to
the company under composite security arrangement. In' most of the cases, the
issue of each bank guarantee should be authorised by a Board resolution
specifying the amount and the party in favour of whom the guarantee is to be
issued. The bank, in addition to any security to cover the issue of the
guarantee, may require the issue of guarantee to be supported by a counter-guarantee
executed by the company under proper authority.
Fixation of selling price: MRTP Act
S. 291-Of the Companies ActlS.33 of the MRTP Act - Resale
Price Maintenance
"RESOLVED that the
Sales Manager of the Company be and is hereby authorised to fix the Company's
selling price in such a way that the retailers may have liberty to sell the
various products of the Company within the maximum selling price prescribed by
the Company and marked on the package or wrapper to such goods so that the
fixation of rate does not lead to restrictive trade practices within the
provisions of the Monopolies and Restrictive Trade Practices Act, 1969."
PRACTICE NOTES
1. Fixation of retail selling price.-A price list to maintain the
minimum selling or retaining price amounts to restrictive trade practice within
the provisions of the Monopolies and Restrictive Trade Practices Act, 1969,
and, therefore, the company should maintain only a maximum retail selling price
to avoid the mischief of the restrictive trade practices under that Act.
Reference to the solicitors for legal action
S. 291-Reference to the solicitors for legal action-Board
Resolution
"WHEREAS the Company's
debtor, M/s. RST & Company Limited, is not paying its debts in spite of
vigorous persuasion and follow up by the Company for the last two years;
AND WHEREAS the debt is
doubtful of recovery. and legal action for the realisation of the debt is
needed;
NOW THEREFORE IT IS RESOLVED
that relevant papers be handed over to the solicitors of the Company to apply
to the Court for the winding up of M/s. RST & Company Limited and realise
the assets there from in satisfaction of the debts of the Company.
RESOLVED FURTHER that Mr . ……or Mr ……the Directors of the Company, individually be and is hereby authorised to swear affidavit and sign any document required by the solicitors and do all and everything for the implementation of the legal action considered hereinabove."
PRACTICE NOTES
1. Initiation of action for realisation of debts.-One of
the very common grounds under which action for realisation of debts is
initiated against a company is a provision pursuant to section 433, clause (f),
which entitles the creditor to apply to the Court for winding up and
realisation of assets for the satisfaction of debt. Clause (f) is a ground for
winding up of the company, if it could be proved that 'the company is unable to
pay its debts.'
2. Winding up not to be used as a method of recovery.-Quite often,
however, the Court does not favour this method to be utillsed merely as a means
for reallsing debts due from a company. Bukhtearpur
Bihar Light Rly. Co. Ltd. v. Union of India, AIR 1954 Cal 499.
Agreement with the employees' union
S. 291-Agreement with the employee's union-Board Resolution
"RESOLVED that approval
be and is hereby accorded to the agreement made between the company and the
employees' union for a period of three years from the date of execution
thereof, as per the draft of a memorandum of agreement between the company on
the one part and the employees' union on the other part, codifying the conducts
of employer-employee relationship, the procedure for promotion and
increment, office hours and discipline and procedure for mutual settlement of
disputes without resorting to strike or lock-out, etc., placed before
this meeting.
RESOLVED FURTHER that Mr ……or Mr……the Director of the Company, be and is hereby authorised to sign such memorandum of agreement with the employees' union with authority to vary, modify, correct or rectify the portions necessary in such agreement at his/their absolute discretion."
PRACTICE NOTES
1. No requirement to execute Agreement with employees' union under
Common Seal.-The memorandum of agreement with the employees' union is not required to be
executed under the common seal of the company but through one or more
authorised representative(s) empowered by the Board to sign such agreement on
behalf of the company, the other signatories obviously being the
President/Secretary or any other representative(s) of the employees' union.
Exercise of lien on shares
S.
291/Regn. 9- Exercise of lien on shares-Board Resolution
"RESOLVED that pursuant to Article ……of the Articles of Association of the Company, the right of lien on 100 ordinary equity shares having consecutive numbers to …… (both inclusive), held by and registered in the name of Mr. CDE and comprised in share certificate No ……be exercised by the Company in view of the non-payment of the final call of Rs ……per share made on ……2002, …… and payable on or before 2002
RESOLVED FURTHER that until
the amount outstanding on account of the final call is paid, the dividends
payable on such shares be retained by the Company and applied towards the
amount so outstanding and that the Secretary of the Company be asked to send
necessary notice of such lien to Mr. CDE, the holder of such shares, and secure
possession of the aforesaid share certificate to be retained in the custody of
the Company."
PRACTICE NOTES
1. Exercise of lien on
shares.-
Regulation 9 of Table 'A' provides for the company's power of lien which is
always first and paramount for any debts due by such member (shareholder) to
the company.
2. Lien effective on partly paid shares only.-The lien
is effective only on partly paid shares.
3. Directors empowered to exempt any share from lien.-The Board
of Directors may at any time declare any share to be wholly or in part exempt
from the provision of this clause.
Enforcement of lien by sale
of shares
S.
291/Reg. 12-Enforcement of lien by sale of shares-Board Resolution
"RESOLVED that shares numbered ……to ……(both inclusive), be and are hereby sold at the ruling market price and that Mr ……Director of the Company, be authorised to execute the necessary transfer deed as the transferor, pursuant to article of the Articles of Association of the company."
PRACTICE NOTES
1. Articles must contain
power for enforcement of lien.- Power for enforcement of lien must be contained in
the articles of the company. In the absence of such power, then can only be
enforced through a suit in a Court of law. Lien and forfeiture are different
rights exercisable by a company for non-payment of calls. Thus, after
enforcement of forfeiture of shares, exercise of lien and action to precipitate
such right is not possible.
2. Enforcement of lien by
sale of shares does not amount to selling by
company of its own share.-Sale in this case does not amount to selling by the
company of its own shares under section 77
as there is no reduction of capital.
Fees on registration of documents
S. 291/Reg. 24-Fees
on registration of documents-Board Resolution
"WHEREAS clause 9 of
the Listing Agreement entered into with the Bombay Stock Exchange Association,
requires the Company not to charge any fees in this behalf.
NOW THEREFORE IT IS RESOLVED
that fee for registration of probate, letters of administration, death
certificates relating to any member/debenture- holders, certificate of
marriage and powers of attorney in relation to any matter submitted to the
Company be not charged.
RESOLVED FURTHER that the Article ……of the Articles of Association of the Company conferring power on the company to charge fees in such events, be suitably amended by calling a General Meeting, in conformity with clause 9 of the Listing Agreement entered into with the Bombay Stock Exchange."
PRACTICE NOTES
1. Listing Agreement
enforceable only after its execution.- The clauses of the Listing Agreement are
enforceable after execution of the agreement for listing of shares. This is in
spite of the contrary provision in the Articles of Association of the company
which should then be amended.
Reimbursement of Traveling Expenses to Directors
S. 291/Regn. 65-Reimbursement
of Traveling Expenses to Directors- Board Resolution
"RESOLVED that
reimbursement by the Managing Director of the sum of Rs. 35,000/representing
to and for Air fare and out of pocket expenses to Shri BCP, the Director of the
company for attending the 35th Board Meeting held on 25th July, 2002, at Delhi
be and is hereby ratified and confirmed."
PRACTICE NOTES
1. Power for reimbursement in Articles.-The power
for reimbursement of traveling and out of pocket expenses must be available in
the Articles of Association of the company.
2. Expenses to be
reimbursed.- Directors may be reimbursed only the actual expenses incurred by them
in attending the Board Meeting.
3. Term 'remuneration' does not
include traveling expenses.-The remuneration
under section 309 of the Companies
Act, 1956, does not include traveling
expenses.
4. Express provision in the Articles for reimbursement of traveling
expenses etc.-Unless there is express provision
in the Articles of a company, the Directors will not be entitled to traveling
expenses etc. Young v. Naval Military and
Civil Service Cooperative Society of South Africa, (1905) 1 KB 687.
5. Payment not unauthorised if sanctioned by a resolution.-If a
company sanctions the payment by a resolution the payment cannot be said to be
unauthorised. Sugar Automotive P. Ltd. v.
CIT, M.P.I., (1984) 55 Comp Cases 141.
Reimbursement of Traveling and out of pocket expenses
S.
291/Regn. 65-Reimbursement of expenses to directors-Board Resolution
"RESOLVED that reimbursement of the sum of Rs. 20,000/- to Shri. RLM, Director of the Company towards traveling and out-of-pocket expenses for attending the Board Meeting of the Company held on ……by……the Managing Director be and is hereby approved."
PRACTICE NOTES
1. Payment of traveling expenses etc., to Directors for attending Board
Meeting.-In addition to the remuneration
payable to directors, they may be paid all traveling, hotel and other expenses
incurred by them in attending and returning from meetings of the Board of
Directors or any committee thereof or general meeting of the company.
2. Reimbursement of expenses in connection with business of company.-The directors shall also be reimbursed expenses incurred by them in
connection with any business of the
company.
Reimbursement of expenses to Directors
S.
291/Reg. 65-Reimbursement of expenses to Directors-Board Resolution
"RESOLVED that approval be and is hereby accorded to the reimbursement of traveling expenses and out-of-pocket expenses as per the bill for Rs . ……for attending Board meeting held on the 2002 to Mr ……a Director of the Company."
PRACTICE NOTES
1. Reimbursement of traveling and out-of-pocket expenses to
Directors.-Directors are entitled to be reimbursed of the traveling and
out-of-pocket expenses for attending a Board Meeting. The Whole-time
Directors, however, would not be entitled to any such out-of-pocket
expenses except the remuneration sanctioned by the company/Government.
Insurance of company's property
S. 291-Insurance of company's property-Board Resolution
"RESOLVED that the
Policy of Insurance covering the Company's factory, buildings, plant, machinery
and stocks against fire and flood are placed before the meeting duly initialed
by the Chairman, be and is hereby approved and Mr. A.B., a Director of the
Company be and is hereby empowered to execute the Policy of Insurance under the
common seal of the Company.
RESOLVED FURTHER that the
Secretary of the Company is hereby directed to issue a cheque favouring the
Insurance Company in respect of the premium due on the policy."
PRACTICE NOTES
1. Renewal of Insurance.- Renewal of insurance
policies of the company is a regular annual event and therefore can be done on
the basis of a blanket board resolution.
2. Passing of resolution by
circulation.- The aforesaid resolution can be passed by circulation under section 289 of the Act.
Approving budget of the company
S. 291-Approval of budget-Board Resolution
"RESOLVED that the annual budget of the Company in respect of advertising and publicity expenditure for the period to be and is hereby approved."
PRACTICE NOTES
1. General powers of the
Board.-
The Board of Directors of a company is entitled to exercise all powers and to
do all acts on behalf of the company as the company is authorised to do except
those required to be done by the company in general meeting.
2. Committee of the Board.- The budget of the company
is usually approved by the Budget Committee of the Board formed by the Board
under section 292. As per paragraph
2.2 of Secretarial Standard 1, Committees of the Board should meet at least as
often as stipulated by the Board or as prescribed by any other authority.
Approval of Budget
S. 291-Approval of budget-Board Resolution
"RESOLVED that the budget for the year ended 31st March, 19... in respect of the following items be and is hereby approved:
ITEMS BUDGETED
AMOUNT
1. Production Rs.
50,00,000
2. Sales expenses Rs.
10,00,000
RESOLVED that the
sales/production, etc. Budget for the
year ended ............... I for a total
sum of Rs. submitted by Shri manager and initialled by the Chairman for
identification be and is hereby approved."
PRACTICE NOTES
Same as given under Resolution No. 641.
Ratification of act of Managing Directors
S. 291-Ratification of act of Managing Directors-Board
Resolution
"RESOLVED that the borrowing of a sum of Rs . ……by the Managing Director of the Company from financial institution on the terms and conditions set out in the General Form of Loan Agreement, a copy of which is placed before the meeting, duly initialed by the Chairman for purposes of identification thereof, be and is hereby ratified and approved.
RESOLVED FURTHER that Mr.
A.B. and Mr. C.D. Directors of the Company be and are hereby jointly authorised
to sign and execute the loan documents, under the common sea] of the Company,
in the manner provided in the Articles of Association of the Company."
PRACTICE NOTES
1. Renewal of Insurance.-Renewal of insurance policies of the company
is a regular annual event and therefore can be done on the basis of a blanket
board resolution.
2. Passing of resolution by circulation.-The aforesaid
resolution can be passed by circulation under section 289 of the Act. While
passing this resolution by circulation paragraphs 6.1, 6.2, 6.3 and 6.4 of
Secretarial Standard 1.
Revision of salary scale
pursuant to agreement
S. 291-Revision of scales of pay pursuant to agreement with
employees-Board Resolution
"RESOLVED that approval
be and is hereby accorded to the revision in the scales of pay of Class I
Employees in terms of the agreement entered into between the Company and the
employees' union, a copy of which is placed before the meeting, duly initialed
by the Chairman."
PRACTICE NOTES
1. Delegated to the committee.-Revision of
pay scales of employees and other important personnel matters are usually
delegated to a committee called wage payment committee and need not be handled
by the board of directors itself.
2. Passing of resolution by circulation.-The aforesaid
resolution can be passed by circulation under section 289 of the Act.
Application of reserves for
meeting expenses
S. 291/Regn. 87-Transferfrom reserves-Board Resolution
"RESOLVED that a sum of Rs ……be and is hereby transferred from the general reserves of the company to its profit and loss account for the purpose of being utilised to write off the preliminary expenses of the company."
PRACTICE NOTES
1. General Powers of the Board.-The Board
of Directors of a company is entitled to exercise all powers and to do all acts
on behalf of the company as the company is authorised to do except those
required to be done by the company in general meeting.
2. Application of share premium account.-In writing
off the preliminary expenses of the company, the amount in the share premium
account can also be utilised under section 78(2)(b).
Transfer of amount from
general reserve to Profit and Loss Account
S. 291/Regn. 87-Transfer
of amount from general reserve to profit and loss account-Board
Resolution
"RESOLVED that the following amounts be and hereby are transferred from the general reserve of the Company to the profit and loss account of the Company for the purposes indicated below:
1.
Rs . -Preliminary expenses
2.
Rs . -Goodwill written off."
PRACTICE NOTES
1. General Powers of the Board.-The Board
of Directors of a company is entitled to exercise all powers and to do all acts
on behalf of the company as the company is authorised to do except those
required to be done by the company in general meeting.
2. Application of share premium account.-In writing
off the preliminary expenses of the company, amount in the share premium
account can also be utilised but not for writing off goodwill.
Transfer of amount to general reserve
S. 291/Regn. 87-Transfer of amount to General Reserve
Account-Board hesoluti6n
"RESOLVED that a sum of Rs . ……be transferred to the General Reserve out of the profits of the year ended 31-3-2002 in compliance with Rule 2 of the Companies (Transfer of Profits to Reserves) Rules, 1975."
PRACTICE NOTES
1. Prohibited by the Rules.-The Companies
(Transfer of Profits to Reserves) Rules, 1975 prohibits the declaration or
payment of dividend unless a minimum percentage transferred to the Reserves.
Assigning duties to principal officer called but not really Directors
S. 291-Assigning duties to principal officer called but not
really Directors Board Resolution
"RESOLVED that the senior officers of the Company holding the position of departmental Managers be designated as Sales Director, Production Director, Personnel Director, Accounts & Finance Director, it being clearly understood that such Directors shall not be construed and, in fact, shall not be 'Directors' within the meaning of the Companies Act, 1956 or any other statute nor shall they have any of the power(s) of a Director within the meaning of the Companies Act, 1956 or any other statute, and that the liability of the aforesaid departmental Directors be limited to the terms of the agreements only between the persons concerned and the Company and that they shall not be subject to any of the liabilities of the Directors under the Companies Act, 1956, or any other statute in force from time to time.
RESOLVED FURTHER that the
appointment, removal and fixing the terms and conditions of appointment of the
aforesaid departmental Directors shall be determined by the Board and that the
departmental Directors, as aforesaid, shall not have any right if access to the
books of the Company except in the course of their official duties without
specific sanction of the Board of Directors.
RESOLVED FURTHER that the
Board of Directors, at their discretion, may choose to invite any of such
departmental Directors to attend Board Meeting to explain only such matters as
they may be called upon to apprise and that such Directors shall have no power
otherwise to participate in discussion or deliberation of the Board Meeting nor
have any right to vote thereat."
PRACTICE NOTES
1. Designating heads of Departments as departmental Directors.-There is
no such term as 'departmental directors' in the Companies Act, 1956 and the
appointment of departmental Directors as such is not regulated by the Companies
Act except as provided in S. 292. In
some companies it is quite common to designate the senior officers, who are
heads of departments, as Directors for the departments. Following the American
pattern of corporate management, the practice of designating senior officers as
President and Vice-President is also quite common. In effect, if the
powers exercised by the 'President' are equivalent to those of a Manager or
Managing Director, and it is designed to remunerate a person as 'President',
the company should comply with the formalities of appointment and remuneration
of managerial personnel under the Companies Act, 1956.
Opening and operating bank account
S. 291-Opening & operating bank account-Board
Resolution
"RESOLVED that an account in the name of the Company be opened with the Bank at and that Mr …… and Mr ……the Directors of the Company, be and are hereby authorised jointly to sign the necessary forms and documents in this behalf.
RESOLVED FURTHER that the
Bank be instructed to honour all cheques, promissory notes, and other orders
drawn by and all bills accepted on behalf of the Company whether such account
be in credit or overdrawn, and to accept and credit to the account of the
Company all moneys deposited with or owing by the Bank of any account or
accounts at any time or times kept or to be kept in the name of the Company and
the amount of all cheques, notes, bills, other negotiable instruments, orders
or receipt, provided they are endorsed/signed individually by Mr …… and Mr
……the Directors of the Company, and Messrs. PNX, XYZ, NMD, the authorised
signatories for the time being of the Company on behalf of the Company and
such signature(s) shall be sufficient authority to bind the Company in all
transactions between the Bank and the Company including those specifically
referred to herein.
RESOLVED FURTHER that Mr ……and Mr ……the Directors of the Company and Messrs. PNX, XYZ, NMD, the authorised signatories of the Company, be and are hereby authorised jointly to withdraw and deal with any of the Company's securities or properties or documents of the title thereto which may be deposited with the Bank from time to time whether by way of security or otherwise.
RESOLVED FURTHER that the
persons hereinabove, be and are hereby authorised jointly to -acknowledge
all types of debts on behalf of the Company.
RESOLVED FURTHER that the
Company, through their authorised persons as mentioned hereinabove, be and are
hereby authorised to borrow from time to time as may be required from the
aforesaid Bank by way of cash credit, loan, overdraft, discounting of
bills,.opening of letters of credit (inland and/or foreign) releasing of
documents against receipts, signing or counter-signing of guarantees, and
under any other type of credit line or facility up to an amount of Rs.
1,00,00,000/- in the aggregate.
RESOLVED FURTHER that Mr ……and Mr …… the Directors of the Company, be and are hereby authorised jointly to sign, seal, get registered and deliver on behalf of the Company, all documents and forms relating to all its advances and credit facilities as aforesaid as also for lodgement and withdrawal of securities in ac counts of the Company, and to secure such advances temporarily or otherwise against pledge, mortgage, charge, hypothecation in lieu of all future and present stock of raw materials, stores, work-in-progress, finished goods, and book debts and of all or any other properties of the Company, movable or immovable, and such other securities including goods that may be acceptable to the bank in such form or forms as may be required by the Bank, and to sign any instruments/instructions, indemnities and counter-indemnities which may be required by the Bank from the Company in connection with the Company's business.
RESOLVED FURTHER that Mr ……and Mr . ……the Directors of the Company, be and are hereby authorised jointly to exercise the powers vested in them by the resolution in addition to such powers as may be conferred on them individually by virtue of the Powers of Attorney already granted to them or by virtue of any provisions contained in this behalf in the Memorandum and the Articles of Association of the company.
RESOLVED FURTHER that Mr ……and Mr …… the Directors of the Company, be and are hereby authorised jointly to affix the company's seal on the documents in terms of article of the Articles of Association of the Company.
RESOLVED FURTHER that the
Bank be furnished with a copy of the Memorandum and the Articles of Association
of the Company and a list of the names and specimen signatures of the Directors
and other officers of the Company, as authorised hereinabove, to sign on behalf
of the Company and be informed from time to time by a notice in writing signed
by the Chairman, of any changes which may be made in this behalf so as to
entitle them to act upon such notice until the receipt of further notice signed
by the Chairman.
RESOLVED FURTHER that a copy
of any resolution of the Board purported
to be certified as correct by the Chairman of the meeting shall, as between
the bank and the Company, be conclusive evidence of passing of the resolution
so certified.
RESOLVED FURTHER that a copy
of these resolutions be sent to the Bank, which resolutions shall remain in
force until notice of their withdrawal, change or cancellation is given to the
Bank in the manner hereinbefore mentioned, in writing, by or under the
authority of the Chairman of the Company.
RESOLVED FURTHER that the
borrowings of the Company under the above resolutions are within the borrowing
powers of the Directors, and that no restrictions and conditions on the
exercise of such borrowing power exist or have been imposed by the Company in a
General Meeting.
RESOLVED FURTHER that the
borrowings of the Company under the above resolutions are within the
unexhausted borrowing powers of the Company, or within the powers conferred by
resolution passed by the shareholders of the Company at a duly convened General
Meeting authorising the Board of Directors of the Company to borrow in excess
of the aggregate of the Company's paid-up capital and free reserves.
RESOLVED FURTHER that no
debentures have been issued by the Company creating a floating or specific
charge on the securities which may be deposited against advance to be taken in
pursuance of the above resolution nor is there a prior charge thereon in favour
of any bank or lender for raising any other advance."
PRACTICE NOTES
1. Private Company may provide additional disqualifications.-A private
company, which is not a subsidiary of a public company, can provide in its
articles, additional grounds other than those provided in section 283 on which
a Director should vacate office.
2. When additional ground has effect of removing director power to be
exercised at general meeting.-When any
such additional ground mentioned in its articles has the effect of removing a
Director, then that power should only be exercised in its General Meeting and
any such power given to the Board by the articles will be ineffective by virtue
of section 9.
3. Leave of absence to
director.- It is customary for the Board to grant leave of absence to the
Director even without any formal request being made by the Director in this
behalf. If such leave of absence is not granted, the Board should record
reasons for not doing so.
Agreement with depository for dematerialisation of shares
S. 291-Agreement with depository for dematerialisation of shares-Board
Resolution
WHEREAS the company has
received a direction from the Securities and Exchange Board of India dated 2002 asking the company to
dematerialise its share with effect from
……2002;
AND WHEREAS the company
approached the National Securities Depository Ltd. to be the depository of the
company to hold its shares in the dematerialised form;
AND WHEREAS the said
National Securities Depository Ltd., has agreed to be the depository of the
company.
NOW, THEREFORE, IT IS
RESOLVED that a bipartite agreement as per the draft given by the bye-laws
of the said depository and placed before this meeting initialed by the Chairman
for the purpose of identification be and is hereby entered into.
RESOLVED FURTHER that the
Secretary of the company be authorised to sign the said agreement on behalf of
the company and other documents and papers as may be necessary from time to
time in connection therewith and incidental or ancillary thereto.
PRACTICE NOTES
1. Bye-laws of the
depository.- When a company is required to dematerialise its shares in fungible
form under the directions of the SEBI, it is required to enter into an
agreement with a depository to be appointed for this purpose. The said
agreement should be as per the specimen given in the bye-laws of the
depository and can be either bipartite or tripartite. The tripartite agreement
has to be entered into where the concerned company has appointed a Registrar to
the issue or share transfer agent for processing its share transfer work.
2. Entering the name of depository in the register of members.-Once the
shares are dematerialised in the fungible form certificate of securities are
surrendered to the company by the participant on behalf of the beneficial
owners. On receipt of the certificates of securities the company should
mutilate and cancel them and substitute in its record being the register of
members, the name of the depository as the registered owner. The company should
also send a certificate to the concerned depository appointed by the company as
well as every Stock Exchange where the securities are listed as to, the
receipt, mutilation and cancellation of certificates of securities.
3. Certain provisions of the Act not applicable-Sections 153,
153A, 153B, 187B, 187C and 372 of the Companies, Act, 1956 are not applicable
to depository in respect of securities held by it on behalf of the beneficial
owners.
External commercial
borrowing of US $ 50 million under Automatic route
S. 291-External commercial borrowing of US $ 50 million under
Automatic route -Board Resolution
WHEREAS the company is
proposing to expand its existing capacity from 30,000 tons to 50,000 tons;
AND WHEREAS the said
expansion is proposed to be financed by obtaining external commercial borrowing
of US $ 50 million by way of bank loans;
NOW THEREFORE, IT IS
RESOLVED that external commercial borrowing of US $ 50 million be and is hereby
obtained from ..............
RESOLVED FURTHER that the
Secretary of the company be and is hereby authorised to submit through the
company's authorised dealer 3 copies of the loan agreement of the Regional
Office of the Reserve Bank of India, New Delhi after signing the same with the
lender, enclosing necessary documents and papers and to do each and everything
that may be necessary in connection therewith or ancillary or incidental
thereto.
PRACTICE NOTES
1. Maturity period.-The maturity
period of ECB should not be less than three years and the choice of repayment
schedule within the said maturity period of three years should be decided by
the company in advance and mentioned in the application made to the RBL From
14th June, 2000 the average maturity of ECBs for the purpose of ECB Guidelines
shall be weighted average of all disbursements taking each disbursement
individually and its period of retention by the borrower.
2. Choice of currency and security of the ECB.-Choose in
advance the currency of the loan to be obtained by way of ECB and also the
basis of interest rate on it whether floating or fixed and mention the choice
in the application to the RB1. The security to be provided to the lenders of
the ECB should also be decided prior to the making of the application in
consultation with the lenders and the proceeds of ECB should not be utilised
for investment in stock market or for speculation in the real estate.
3. The validity period of ECB approval.-The ECB
approval is valid for a period of six months, i.e., the executed copy of the loan agreement should be submitted
within this period. Only in case of power project the authority of the approval
will be a period of one year. No extension of validity period is allowed but a
fresh application can be submitted after expiry of one month. Bonds,
debentures, FRNs and other such instruments will have additional validity
period of 3 months for all the ECB approvals across the board. [Press note
dated 5-5-1999].
4. ECB Guidelines revised.-(1) Change
made in structured obligation of ECB Guidelines to the effect that henceforth
denomination of debt service in a post-default situation may be in rupees
or in forex as envisaged initially in the contract document. (2) ECB Guidelines earlier gave
flexibility to domestic investors to raise ECBs upto a maximum of USD 50
million, now it has been enhanced to USD 200 million to finance equity
investment in downstream infrastructure projects. (3) Prepayment of ECBs have
been now permitted 100% prepayment where the source of funds is from EEFC
accounts. From 14th June 2000, all prepayment approvals of given by RBI as per
prevailing guidelines on prepayment even in cases where ECBs have been approved
earlier by the Ministry of Finance. (4) 100% EOUs will be permitted to have
foreign currency exposure up to 60% of the project cost. (5) End-use
relaxation has been given to the effect that henceforth ECB's can be used for
any purpose except investment in real estate and in capital markets. (6) All
infrastructure projects will be permitted to have ECB exposure of 50% of the
project cost which was 35% earlier. Greater flexibility beyond 50% of the
project cost may be allowed based on merits. Corporate are eligible to enter
into loan agreements with overseas lenders for raising. (7) ECB for an amount
upto US $ 50 million or for refinancing an existing ECB and for this they are
not required to obtain any prior approval for raising ECB.
5. ECB prepayment freed.-The RBI
on 5th August 2002, announced prepayment of external commercial borrowings
(ECB) to be put on automatic route and would be effective till March 31, 2003.
Corporate can make the prepayment of ECB without any cap provided that such
outflow is matched by its forex inflows in the form of foreign investment in
the company. Corporate can also make such prepayment without any cap out of its
Export Earners' Foreign Currency Accounts. The RBI has also allowed prepayment
of ECBs to the extent of 10% of the outstanding loan once during the entire
duration of the loan. Besides the automatic route can also be taken by those
where the residual maturity of the loan does not exceed one year. For these two
categories, the RBI has capped the prepayment at $ 50 million.
External commercial borrowing of more than US $ 50 million and upto 100
million
WHEREAS the company is
proposing to expand its existing capacity from 50,000 tons to 70,000 tons;
AND WHEREAS the said
expansion is proposed to be financed by obtaining external commercial borrowing
of US $ 100 million by way of bank loans;
NOW, THEREFORE, IT IS
RESOLVED that external commercial borrowing of US $ 100 million be and is
hereby obtained by making an application to the Reserve Bank of India, Exchange
Control Department Central Office Mumbai.
RESOLVED FURTHER that the
Secretary of the company be and is hereby authorised to make the aforesaid
application in the prescribed format enclosing necessary documents and papers
and to do each and everything that may be necessary in connection therewith or
ancillary or incidental thereto.
PRACTICE NOTES
1. Application to the RBI.-For raising
ECB more than $ 50 million but up to $ 100 million an application is to made to
the Reserve Bank of India in a prescribed format to be obtained from the RBI.
Automatic route is not available to raising of ECB more than $ 50 million.
External commercial borrowing of more than US $ 100 million
S. 291-External commercial borrowing of more than US $ 100
million-Board Resolution
WHEREAS the company is
proposing to make a new investment by putting up a new plant at village District in the State of Uttar
Pradesh;
AND WHEREAS the said new
investment is proposed to be financed by obtaining external commercial
borrowing of US $ 100 million by way of supplier's credit;
NOW, THEREFORE, IT IS
RESOLVED that external commercial borrowing of US $ 100 million be and is hereby
obtained by making an application to the Joint Secretary (ECB), Department of
Economic Affairs, Ministry of Finance, North Block, New Delhi-110 001;
RESOLVED FURTHER that the
Secretary of the company be and is hereby authorised to make the aforesaid
application in the prescribed format enclosing necessary documents and papers
and to do each and everything that may be necessary in connection therewith or
ancillary or incidental thereto.
PRACTICE NOTES
1. Maturity period.- The maturity period of ECB
should not be less than five years and the choice of repayment schedule within
the said maturity period of five years should be decided by the company in
advance and mentioned in the application made to the Ministry of Finance.
2. Choice of currency and security of the ECB.-Choose in
advance the currency of the loan to be obtained by way of ECB and also the
basis of interest rate on it whether floating or fixed and mention the choice
in the application to the Ministry of Finance. No application fee is required
to be paid for this application. The security to be provided to the lenders of
the ECB should also be decided prior to the making of the application in
consultation with the lenders and the proceeds of ECB should not be utilised
for investment in stock market or for speculation in real estate.
3. The validity period of ECB approval.-The ECB
approval is valid for a period of six months, i.e., the executed copy of the loan agreement should be submitted
within this period. Only in case of power project the authority of the approval
will be a period of one year. No extension of validity period is allowed but a
fresh application can be submitted after expiry of one month. Bonds,
debentures, FRNs and other such instruments will have additional validity period
of 3 months for all the ECB approvals across the board. [Press note dated 5-5-1999].
Allotment of fractional shares in a bonus issue
Ss.
291/81/Regn. 96-Table A-Allotment of fractional shares in a bonus
issue-Board Resolution
"RESOLVED that in terms
of the resolution of the general body passed at the Extraordinary General
Meeting of the company held on ……an
aggregate of new equity share representing fractions in the bonus issue, be
and are hereby consolidated into market able lots of ……equity shares and allotted to Mr. A.B. a trustee of XYZ Trust
for sale at prevailing market prices.
RESOLVED FURTHER that the
net sale proceeds after defraying the expenses of the sale be distributed to
the shareholders entitled to fractional shares in proportion to their
respective holdings."
PRACTICE NOTES
1. Adherence to Department of Company Affairs Guidelines.-The Guidelines dated 8th October, 1993, for creation of Trust for disposal
of odd lot of share be properly adhered to.
2. Company's duty to check records of the Trustee.-The books
of the trustee should be closely monitored by the company and, it should also
maintain surveillance on the books of the trustee.
Recommendation of bonus issue
Ss.
291/81/Regn. 96-Recommendation of Bonus Issue-Board Resolution
"RESOLVED that subject to the approval of ' shareholders in General Meeting a sum of Rs ……from and out of the General Reserves of the Company be capitalised and applied in payment of ……No. of Equity Shares of Rs. 30/- each forming part of Un-issued Capital which shares shall be allotted as bonus shares to the Members of the Company in the proportion of ……Bonus Shares for every No. of Equity Shares held by the Member on a date to be determined by the Board of Directors of the Company. Fraction be ignored and that such bonus shares shall rank pari passu in all respects with the existing equity shares of the company including entitlement for any dividends that may be declared in respect of the year ending.
RESOLVED FURTHER that an Extraordinary General Meeting called for and held on ……at Hrs ……to consider and pass necessary resolution for giving effect to this recommendation."
PRACTICE NOTES
1. Provision of bonus shares not necessary in the Articles.-Proviso to
sub-section (3) of section 205 of the Act provides for capitalisation of
profits and reserves of a company for the purpose of issuing fully paid bonus
shares or paying up any amount, for the time being unpaid on any shares held by
the members of the company. Since such a provision is already present in the
Act, specific provision need not be there in the Articles of Association of the
Company.
2. What
reserves can be applied for issue of bonus shares.-The share
premium account and the capital redemption reserve account should only be
applied in the paying up of un issued shares to be issued to members of the
company as fully paid bonus shares.
Recommendation of bonus issue with differential voting rights
Ss. 291/86(a)(ii)-Recommendation of bonus issue with differential
voting rights-Board Resolution
"RESOLVED that subject to the approval of shareholders in General Meeting a sum of Rs ……from out of the free reserves of the company be capitallsed and applied in payment of No. of Equity Shares of Rs . ……each with differential voting rights each forming part of the un-issued capital which shares shall be allotted as bonus shares to the members of the company in the proportion of Bonus Shares for every ……No. of Equity Shares held by the member on a date to be determined by the Board of Directors of the company.
RESOLVED FURTHER that the
fraction if any in the aforesaid be ignored and that such bonus shares with
differential voting rights be issued in accordance with the terms and
conditions prescribed by the Companies (Issue of Share Capital with
Differential Voting Rights) Rules, 2001.
RESOLVED FURTHER that an
Extraordinary General Meeting be called for and held on ……at
……hrs to consider and
pass necessary resolution for giving effect to this recommendation.
PRACTICE NOTES
1. Pre-requisites for issue of bonus shares with differential
voting rights.-The company issuing such shares
must be a company limited by shares and it must have distributable profits in
terms of section 205 for the 3 financial years preceding the year in which it
decides to issue such shares. The company should not have defaulted in filing
annual accounts and annual returns for the 3 financial years immediately
preceding the financial year in which it decides to issue such shares and it
has not failed to repay its deposits or interest thereon on due date or redeem
its debentures on due date or pay dividends. The company should not have been
convicted of any offence arising under the SEBI Act, 1992, the Securities
Contracts (Regulations) Act, 1956 the Foreign Exchange Management Act, 1999 or
it has not defaulted in meeting investor grievances. The bonus shares to be
issued with differential rights must be equity shares only.
2. Postal Ballot.- If the company which is
issuing the bonus shares with differential voting rights is a listed company
then the approval of the shareholders should be taken through postal ballot.
3. Compliance Certificate.-Companies having
paid-up share capital of less than Rs. 2 Crores but equal to or more than
Rs. 10 lakhs are required to obtain a Compliance Certificate from a secretary
in whole-time practice to be filed with the Registrar of Companies
mentioning therein inter alia that
the company has issued bonus shares with differential voting rights during the
financial year and compiled with the provisions of the Act as per paragraph 19
of the Form of Compliance Certificate appended to the Companies (Compliance
Certificate) Rules, 2001.
Conversion of partly paid into fully paid shares
Ss. 291/81/Regn. 96-Conversion of partly paid into
fully paid shares Board Resolution
"RESOLVED that subject
to no objection of the Securities and Exchange Board of India and subject to
such terms as it may impose, the sum of Rs
……standing to the credit of the company's general reserve be capitalised
and applied for paying up in full the uncalled liability of Rs ……per share on the equity share issued by
the company."
PRACTICE NOTES
1. Articles must contain power.-The articles
should empower the exercise of such a power.
2. SEBIs nod.-The company should get the
proposal filed with the Securities and Exchange Board of India (SEBI).
3. SEBI (DIP) Guidelines 2000.-Clause 2.7 of the said guidelines
provides that no company shall make a public or rights issue of equity shares
or any security convertible at later date into equity shares, unless all the
existing partly paid-up shares have been fully paid or forfeited.
Guarantee given by Directors
S.
292-Guarantee given by Directors-Board Resolution
"RESOLVED to note that Mr ……and Mr, ……the Directors of the Company, who are agreeable to give personal guarantee for the repayment of the credit lines sanctioned by the Bank (and have been accepted by the Bank) would act as the joint and several guarantors such guarantee forming collateral security against the credit lines granted by the Bank Branch, Nagpur-440 012."
PRACTICE NOTES
1. Guarantee given by
Directors.- The Reserve Bank of India has reviewed the practice of commercial
banks and other financial institutions taking personal guarantees from the
Directors and other managerial personnel or sister concerns of borrowing
companies while sanctioning loans. In some cases, such guarantees are taken
essentially to make up for the insufficiency of tangible security offered or
the weak financial position of the borrowing concern. In some other cases,
guarantees are taken as a matter of routine even though the financing
institutions have the security of the company's tangible assets. An important
reason for taking guarantees so far has been the feeling that with the signing
of the guarantees, the personal interest of the Directors and other managerial
personal in the company IS Strengthened and hence, the banks taking such
guarantees can be reasonably confident of the continuity of good management.
2. Payment of guarantee
commission to directors.- If the Directors giving guarantee receive guarantee
commission from the company of which they are Directors and which is the
borrowing company then they would be deemed to receive remuneration for
rendering service in "any other capacity" within the meaning of s.
309 of the Act.
Interest on arrears of call money
S. 292(l) W-Interest on call money arrears-Board Resolution
"RESOLVED that interest
at 13% per annum from 31-3-2002 till date of payment be charged in
respect of the arrears of call money due from the shareholders mentioned in the
defaulters list, a copy of which is placed before the meeting and initialed by
the Chairman, and the Secretary of the Company be directed to inform the
shareholders accordingly and issue a Public Notice in this behalf."
PRACTICE NOTES
Articles to empower company.- This power can be exercised
only if permitted by the Articles of Association of the company.
Power to make calls
(Another format)
S. 292(l)(a)-Power to make calls-Board Resolution
"RESOLVED that the
second and final call of Rs. 10/- per share be and is hereby made on the
holders of 90,000 equity shares of Rs. 10/each in the equity capital of the
Company and that the amount of calls be payable on or before 30th September,
2000, at the registered office of the Company or at any Branch of the State
Bank of India operating in the Union Territory of Delhi."
PRACTICE NOTES
1. Restriction in Articles.-Please check up whether there is
any restriction in the Articles of Association on the amount to be called at
one time.
2. Resolution to be passed at Board Meeting and not by circulation.-The resolution
has to be passed at a proper Board Meeting held after due notice to Directors
and not by circulation.
3. Power not to be delegated to committee of Directors/Managing
Director.-The power to make calls cannot
be delegated to any Committee of Director or Managing Director, etc.
4. Listing agreement to be complied with before making calls.-If the shares are quoted on the
Stock Exchange, check up the provisions of the Listing Agreement which are to
be complied with before making the calls.
5. Opening of special call account.-A special call account be
opened for this purpose with the bankers of the company and a resolution be
passed to this effect.
Power to buy-back securities
S. 292(1)(aa)-Power to authorise the buy-back of securities-Board
Resolution
"RESOLVED that the Board of Directors of the Company be and is hereby authorised and shall deemed to have always been so authorised to buy-back equity shares of the company from the members whose names appear on the Register of Members as on out of the free reserves of the company.
RESOLVED FURTHER that the
Secretary to the Company be authorised to carry out the buy back procedure as per the provisions of the Companies Act,
1956 and rules and regulations made
there under.
PRACTICE NOTES
Same as given under Resolution No. 245.
Power to issue debentures
Ss. 292(1)(b)/293(l)(d)-Power to issue debentures-Board
Resolution
"RESOLVED that the Board
of Directors of the Company be and is hereby authorised and shall deemed to
have always been so authorised to raise or borrow from time to time at its
discretion by issue of redeemable non-convertible debentures of Rs. 100/-
each carrying interest at the rate of 15% per annum up to a limit of rupees one
crore.
RESOLVED that the consent is
hereby given to the company raising a loan of Rs. 70,00,000/by issuing 70,000
redeemable non-convertible debenture of Rs. 100/- each carrying
interest @ 10% per annum and securing the same by way of equitable mortgage
through the deposit of the title deeds relating to the immovable property of
the company, such debentures to be paid on or before 31st December,
2002, at the latest or at any time, at the option of the company after 31st
December, 2002 on giving three months' prior notice to the holders of the
debentures.
RESOLVED FURTHER that the
debentures shall be issued, pursuant to the deed of trust to be executed
between Messrs ABC Ltd., as trustees and the Company as per draft tabled before
the meeting duly initialed by the Chairman for purposes of identification.
RESOLVED FURTHER that the
said trust deed be executed by the Managing Director of the Company and any one
of the Directors of the company under the common seal of the company.
RESOLVED FURTHER that after
execution of the trust deed, the debentures be offered for public subscription
at par, the full amount thereof being payable on application and that the offer
be made by way of prospectus in terms of the draft tabled before the Directors,
duly initialed by the Chairman for purposes of identification.
RESOLVED FURTHER that the
Secretary of the Company be and is hereby directed to file with the Registrar
of Companies a copy of the prospectus and to do all such acts and things as may
be required in this connection.
RESOLVED FURTHER that the
schedule for advertising and circulating the prospectus tabled before the Board
and initialed by the Chairman for the purposes of identification be and is
hereby approved and the Secretary of the Company be and is hereby directed to
take necessary action.
RESOLVED FURTHER that
arrangements be made with the State Bank of India through its main branch,
Parliament Street, New Delhi to make arrangement for receiving the subscription
at all its branches in the Union Territory of Delhi and keeping the
subscription so collected in a separate account captioned "10% redeemable
non-convertible debenture."
PRACTICE NOTES
1. Power exercisable at Board Meeting.-The resolutions cannot be passed
by circulation. A proper Board Meeting is required to be held after due notice
to all the Directors.
2. Power not to be delegated to Committee of Directors.-The Board cannot delegate this
power to any Committee of Directors.
3. Follow Guidelines of SEBI.-Ensure to follow Securities and
Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000.
4. Mortgaging whole or substantially whole of undertaking.-If the company is mortgaging
its whole or substantially the whole of its undertaking, first pass a
resolution pursuant to section 293(l)(a) of
the Act before passing the Board Resolution.
5. Listed company to obtain permission of Stock Exchange concerned and
get prospectus and letter of offer approved.-If the company is enlisted on
any recognised Stock Exchange, permission of the Stock Exchange concerned be
obtained and get the prospectus and the letter of offer approved from them.
6. For issue of convertible
debentures follow provisions of Section 81 and Public Companies (Terms of Issue
of Debentures and of Raising Loans with Option to convert such Debentures or
Loans into Shares) Rules, 1977.-If it is proposed to issue convertible
debentures, the provisions of section 81 and Public Companies (Terms of Issue
of Debentures and of Raising Loans with an option to convert such Debentures or
Loans into Shares) Rules, 1977, should
be taken into account and if the issue is not in accordance with the said
rules, prior approval of the Central Government pursuant to section 81(3)(a) of the Act should be obtained.
7. Obtain prior approval of Central Government in case issue not in
accordance with Rules.-If the issue is not in accordance with the
provisions of Public Companies (Terms of Issue Debentures and of Raising Loans
with an option to convert such Debentures or Loans into Shares) Rules, 1977, prior approval of the Central
Government pursuant to Section 81(3)(a) of
the Act should be obtained.
8. Filing of returns with Registrar of Companies.-File returns pursuant to sections
125, 128 and 129 of the Act with the Registrar of Companies concerned.
Power to borrow otherwise than on debentures (S. 292(l)(c))
Where Directors of a company
have borrowed funds without authorisation from the company, the company cannot
repudiate liability to repay if the funds have been used for the benefit of the
company. Kumar Krishna Rohatgi v. State
Batik of India, (1980) 50 Com Cases 722
(DB) (Pat).
Even if a resolution is duly
passed at a meeting of the Board, Directors' borrowing for ultra vires purposes being beyond the powers of the Board and of
the company in General Meeting will not bind the company. National Provincial Bank v. Introductions Ltd., (1969) 1 All ER 887.
Strangers dealing with a
company are entitled to assume that a Director or Manager who acts in
conformity with the company's articles, might have been but was not in fact
authorised to borrow . was acting under the company's authority. Siva Sankara Panicker v. Kerala Financial
Corporation, (1980) 50 Com Cases 817 at
832.
Borrowing of moneys otherwise than on debentures by way of unsecured
loan
"WHEREAS the overdraft limit of Rs ……granted by the Bank Branch, Nagpur 440 012, has almost reached the said level;
AND WHEREAS the Company will have to pay Rs ……as the last installment of advance tax pursuant to the Income-tax Act, 1961, within 2002 ;
AND WHEREAS the Company approached M/s. XYZ Investments Co. Ltd., Nagpur-440 012, for an unsecured loan of the aforesaid amount of Rs ……repayable on the .
NOW THEREFORE IT IS RESOLVED that the Company do borrow an amount of Rs ……from M/s.XYZ Investments Co. Ltd., carrying interest at the rate of per cent per annum provided that the monthly accrued interest shall become payable within ten days from the concluding date of the previous month."
PRACTICE NOTES
1. Board's power to borrow
money otherwise than on debentures.- The board's power to borrow moneys otherwise
than on debentures must be exercised only by means of resolutions passed at
meetings of the Board. Borrowing from the bank within the ambit of prescribed
section 293(l)(d) and the Explanation
there under may be done by adopting a resolution of the Board of Directors (but
not by circulation). Such a power may also be delegated to any committee of
Directors.
Power to borrow otherwise than on debentures within the limit approved
by members
"RESOLVED that consent
of the Board be and is hereby given to the Company borrowing from Banks,
Financial Institutions etc., money(s)
up to the limit of rupees twenty five lakhs outstanding at any one time, apart
from the money(s) already borrowed under any specific resolution and subject to
the limit of rupees one crore fixed by the shareholders vide their resolution dated 2-7-2002, passed pursuant
to section 293(l)(d) of the Act and that the Managing Director and any one
other Director of the Company be and are hereby empowered jointly to execute on
behalf of the Company all documents and to issue receipts, promissory notes etc., and to affix the common seal of
the company thereon."
OR
"RESOLVED that the
Managing Director of the Company be and is hereby authorised to borrow money to
the extent of Rs. 25 lakhs from Banks on such terms and conditions as to
repayment, interest or otherwise as he may think fit for the purpose of
erection and installation of the plant at factory premises.
RESOLVED FURTHER that the
Managing Director be and is hereby authorised to execute all documents on
behalf of Company which may be required to be executed for the purpose."
PRACTICE NOTES
1. Borrowing limit not to be exceeded.-Ensure that
borrowing never exceeds the limit up to which money can be borrowed pursuant to
a resolution passed under section 293(l)(d) of the Act.
2. Fixation of limit.-In case of borrowing from the Bank, it
will be appropriate to fix the limit of overdraft, cash credit etc., within which limit the Managing
Director may operate. The resolution should also indicate the amount
outstanding at any one time up to which the money can be borrowed by the
delegate.
3. Strangers entitled to assume that directors acting within authority.-Strangers dealing with a company are entitled to assume that a Director or
Manager who consistently with the company's articles, might have been but was
not in fact authorised to borrow, was acting under the company's authority. Siva Sankara Panicker v. Kerala Financial
Corporation, (1980) 50 Com Cases 817 at
832.
4. Borrowing for ultra vires purposes not
to bind company.-Even if a resolution is duly
passed at a meeting of the Board, Directors' borrowing for ultra vires purposes being beyond the powers of the Board and of
the company in General Meeting, will not bind the company. National Provincial Bank v. Introductions Ltd., (1969) 1 All ER 887.
5. Company cannot repudiate liability where borrowing is without
authorisation.-Where Directors of a company have borrowed
funds without authorisation from the company, the company cannot repudiate
liability to repay if the funds have been used for the benefit of the company. Kumar Krishna Rohatgi v. State Bank of
India, (1980) 50 Com Cases 722 (DB)
(Pat).
Temporary accommodation from bank
S. 292(1)(c)-Temporary accommodation from bank-Board
Resolution
"RESOLVED that the
Company do borrow an additional amount of Rs. 25 lakhs over and above the
existing cash credit limit granted to the Company by ……Bank . Branch, Nagpur 440 012, as per the letter dated the
2002, submitted to this meeting, to be covered within the existing security of
current assets hypothecated to the bank and drawing being regulated within
applicable margin thereon and that such additional temporary drawing
(borrowing) is re paid or the drawings on the said Cash Credit Account be
brought down to the substantive limit of Rs. 1 crore within 31st March being
the end of the financial year of the Company.
RESOLVED FURTHER that the
Secretary of the Company be and is hereby authorised to file the necessary
return of modification of charge to the Registrar of Companies, arising out of
temporary extension of limit of the Cash Credit Account.
RESOLVED FURTHER that Mr ……and Mr ……the Directors of the Company, be and are hereby severally authorised to execute all necessary documents in this behalf as may be required by the bank."
PRACTICE NOTES
1. Borrow within limits.-The overall borrowing limits set by a
company in a general meeting by passing a resolution pursuant to section 293(l)(d) should not be exceeded while
taking such temporary loans from banks.
Temporary accommodation from Bank
(Another format)
S. 292(l)(c)-Temporary Accommodation from Bank-Board
Resolution
"RESOLVED that the
Company do borrow and accept the additional credit facilities to the limit of
Rs. 100 lakhs, as in principle agreed by Bank . Branch, Nagpur 440 012, on the terms and conditions as may be
stipulated by the said bank secured by the pledge of imported steel goods and
that a verified list showing price of each item authenticated under the
signature of the Chairman be lodged with the said bank, the drawings carrying a
rate of interest at the rate of .......per cent per annum.
.RESOLVED FURTHER that in
addition to the interest, the rent of the pledged go down, the salary of the go
down-keeper and the dawns (payable monthly) be borne by the Company and
that it will also reimburse any additional expenditure that may be incurred by
the bank solely and necessarily for the maintenance of the pledged stock and
pledged go down.
RESOLVED FURTHER that Mr ……and Mr …… the Directors of the company, be and are hereby jointly and severally authorised to execute all necessary documents in this behalf."
PRACTICE NOTES
1. Borrowing within limits.-The board
of directors should ensure that the total borrowings do not cross the limit
fixed by the company in general under section 293(l)(d) of the Act. If so then another general meeting should be
called to get the approval of the shareholders of the company.
2. Validity of borrowing incurred beyond limits.-If
a company incurs any debt in excess of the limits imposed by section 293(l)(d) of the Act, then such
borrowing will be valid or effectual of the lender proves that he advanced the
loan in good faith and without knowledge that the limit imposed had been
exceeded.
Reduction of interest on overdrawn cash credit limit
S. 292(l)(c)-Reduction of interest on overdrawn cash credit limit-Board
Resolution
"RESOLVED that approval be and is hereby accorded to the reduction in the rate of interest on the outstanding drawings from time to time against the cash credit facilities afforded by the ……Bank, ……Branch, Nagpur 440 012, from the prevailing effective rate of 15 per cent per annum to 12.5 per cent per annum at quarterly rest with effect from ……2002 ……
RESOLVED FURTHER that Mr ……and Mr …… the Directors of the company, be and are hereby jointly and severally authorised to execute all necessary documents as required by the bankers.
RESOLVED FURTHER that the
Secretary of the Company be - and is hereby authorised to file the
necessary return showing modification of charges with the Registrar of
Companies."
PRACTICE NOTES
1. Board's power to borrow money in the ordinary course of business.-The borrowing
for the purposes of business of the company in the ordinary course subject to
restrictions provided under S. 292(l)(c) and
Exp. 11 to section 293(l)(d) is
within the competence of the Board of Directors, but the borrowings must be for
such business activities as are not ultra
vires the objects of the company set out in its Memorandum of Association.
Borrowing beyond the powers of the company and hence beyond the powers of the
Directors does not have the legality of creating a debt, legal or equitable,
and any instrument executed or security given therefor is void, and resolution
passed at a Board Meeting authorising borrowing for ultra vires purposes being beyond the powers of the Board and of
the company (if such resolution is passed at a General Meeting) will not bind
the company. National Provincial Bank v.
Introductions Limited, (1969) 2 Comp LJ 28(1969) 1 All ER 887, confirming (1968) 2 All ER 221 (CA).
2. Restrictions imposed on powers of Board by section 58A.- Section 58A, puts an
added restriction on the power of the Directors to borrow by way of acceptance
of unsecured loan from the public to the extent of 25 per cent of the paid-up
capital and free reserves of the company. Not necessary if it is a private
company, if there is no mortgage or if the borrowing is within the limit laid
down in s. 293(l)(d).
Borrowing from financial institutions
S. 292(l) (c)-Borrowing from financial institutions-Board
Resolution
"RESOLVED that subject to approval in General Meeting, Not necessary if it is a private company, if there is no mortgage or if the borrowing is within the limit laid down in s. 293(l)(d). the Company do borrow from the Finance Corporation (hereinafter referred to as 'the Corporation') a sum of Rs. 1,00,00,000/- (Rupees one crore) only, on the terms and conditions as set out in the standard form of the Loan Agreement (copy annexed hereto duly signed by the Chairman for the purpose of identification) subject, however, to such amendments, modifications, deletions and additions therein as may be mutually agreed to between the Corporation and Mr . or Mr . Directors of the Company, who be and are hereby jointly authorised to negotiate and finalise the terms and conditions contained in the standard form of the Loan Agreement, the salient features of which are placed before the meeting in a statement.
RESOLVED FURTHER that the
aforesaid loan sanctioned by the Corporation, be secured by way of first charge
by hypothecation/mortgage of the new machinery and equipment acquired/to be
acquired by the company for the scheme of diversification/modernization and
also by way of equitable mortgage of the existing lands, buildings, fixed
machinery, plant and fixtures of the company.
RESOLVED FURTHER that the
said Loan Agreement containing the terms and conditions of the aforesaid
facility, after finalisation, be approved by Mr ……or Mr . ……the Directors, on behalf of the Company and that the
same be executed under the common
seal of the Company in the presence of Mr . ……and Mr . ……two of the Directors,
and the Secretary of the Company.
RESOLVED FURTHER that the
following documents, the standard form whereof are placed before this meeting
(duly signed by the Chairman of this meeting) be and are hereby approved
subject to such changes and modifications as may be agreed between the
Corporation and Mr . ……or Mr . the
Directors of the Company:
(i) Deed of hypothecation for the machinery and equipment under
the diversification scheme;
(ii) Deed of hypothecation for three
plenomillers and three tarret lathes already installed in the premises of the
company.
RESOLVED FURTHER that Mr ……or Mr ……the directors of the Company, be and are hereby authorised to finalise all agreements deeds, documents, letters of undertaking, declarations and other papers as may be required to be executed by the Corporation to secure the said loan and further do all such acts, deeds relating to the properties of the Company with the corporation with an intent to create an equitable mortgage in favour of the corporation and hypothecation of new machinery and equipment acquired/to be acquired for the scheme of its diversification as security for the said loan.
RESOLVED FURTHER that the
common seal of the Company be affixed to the deeds of
release/modification/hypothecation/guarantee promissory notes and to such other
documents as may be required to be executed under the common seal of the
Company in favour of the Corporation to secure the aforesaid loan in the
presence of Mr ..........and Mr ……two
of the Directors and the Secretary of the Company.
RESOLVED FURTHER that Mr ……or Mr ……the Director, of the Company be and is hereby authorised to take such action for registration of the said documents with the Registrar of Companies and the Sub-Registrar of Assurances under the Registration Act, and/or for filing of the particulars of charges with the Registrar of Companies under the Companies Act, 1956, and also to do all other things as may be considered expedient and necessary by the Corporation for the completion of the transaction referred to above."
PRACTICE NOTICES
1. Filing of charge.- Once such loan agreement is
executed subject to change of company's prospectus, Form Nos. 8 and 13 should be filed within 30 days of creation of such charge with
the Registrar of Companies along with requisite fee prescribed under schedule X
of the Act.
2. General Meeting approval.- General Meeting approval
should also be taken under section 293(l)(a)
for charging companies properties.
Borrowing short-term working capital by issue of Commercial Paper
"RESOLVED that pursuant
to the applicable provisions of the NonBanking Companies (Acceptance of
Deposits Through Commercial Paper) Directions, 1989 and the guidelines issued
there under and such other approvals, permissions and sanctions as may be
necessary, the approval of the Board of Directors be and is hereby accorded to
the raising of Rs ……by issue of
Commercial paper to (name of Bank or NRI) for a period of more than three
months and not exceeding six months at (mention here the rate).
RESOLVED FURTHER that the
draft of the proposal placed on the table be and is hereby approved and the
Managing Director of the Company be and is hereby authorised to submit the said
proposal to the Reserve Bank of India through ……the lead Bank and to do all
such acts, deeds and things as may be necessary in this regard."
PRACTICE NOTES
1. Type of borrowing.-The company
can borrow short term working capital by issue of commercial paper.
2. Eligibility Criteria.-The tangible
net worth of the company should not be less than rupees four crores in terms of
the latest balance-sheet company has been sanctioned working capital
limit by banks/All India Financial Institutions and the borrowal account of the
company is classified as a standard asset by the financing banks/institutions.
3. Amount which can be raised by issue of commercial paper.-The company
can raise up to the company's working capital (fund based) limit by issue of
commercial paper.
4. Non-resident can invest.-The non-resident
Indian can also invest in the commercial paper but the same is neither
transferable nor the amount repaid on maturity repatriable.
5. Issue of commercial paper exempt under the Deposit Rules.-Issue of
commercial paper is exempt from the provisions of the Companies (Acceptance of
Deposits) Rules, 1975.
6. Credit Rating.-The company should obtain credit rating from an agency
approved by the Reserve Bank of India for issue of commercial paper.
7. Denomination and period of issuance.-Denomination of
commercial paper should be in multiple of Rs. 5 lakhs. The maturity period of commercial paper should not be less
than 15 days and more than one year
from the date of issue. The maturity date of the Commercial Paper should not go
beyond the date up to which the credit rating of the issuer is valid.
Temporary borrowing of money
S. 292(l)(c)-Temporary borrowing of money other than on debenture-Board
Resolution
"RESOLVED that a sum of
Rs. 25 lakhs be borrowed from Eskay Financiers Ltd., against hypothecation of
raw materials in the factory, which raw materials at any one point of time is
of the value of more than Rs. 60 lakhs;
RESOLVED FURTHER that Mr. A.
and Mr. B. Directors of the Company be and are hereby authorised jointly to
execute the deed of hypothecation."
PRACTICE NOTES
1. Resolutions to be passed at a Board Meeting.-In the
case of the following items the board of directors of the company should pass
resolutions only at a meeting held by the board and not by circulation of
resolution provided under section 289 of
the Act:
(a) the power to make calls
on shareholders in respect of money unpaid on their shares;
(b) the power to issue
debentures;
(c) the power to borrow
moneys otherwise than on debentures;
(d) the power to invest the
funds of the company; and
(e) the power to make loans.
2. Delegation of Board's power.-Board of Directors of a
company can delegate to any committee of directors, the managing director, the
manager or any other principal officer of the company the following three
powers:
(a) the power to borrow
moneys otherwise than on debentures;
(b) the power to invest the
funds of the company; and
(c) the power to make loans.
3. Total amount specified.-The resolution
by which the aforesaid delegation is made by the board of directors should
specify the total amount outstanding at any one time up to which moneys may be
borrowed by the delegate.
4. Right of the company.-The right
of the company to impose restrictions and conditions on the exercise by the
board of directors of any of the powers given in sub-section (1) of
section 292 of the Act still remains
with it and it can do so by convening a general meeting and passing resolution
imposing restrictions and conditions on those powers.
Investment of funds (S. 292(l)(d))
Funds are to be invested
only in shares of those companies in which there is reasonable expectation of
receiving adequate return from the investment. In other words, the Directors
must act bonafide in the interest of
the company while exercising the power.
The purchase of property for
some purpose other than the receipt of income is not an investment. Re, Power Public Trustees v. Hastings, (1947) 2 All
ER 282 : 1947 Ch 572. The words 'Invest and investment' are to be taken in the
business sense of laying out of money for interest or profit. Wamanlal Chhota Lal Parekh v. Scindia Steam
Navigation Co. Ltd., (1944) 14 Com Cases 69.
Investment of funds of the company
S. 292(l)(d)-Investment of funds of the company-Board
Resolution
WHEREAS a letter dated the ……2002 ……from the Collector of Central Excise, Bombay, was placed stating that in order to execute a General Security Bond in Form No. B2 for Rs. 1,50,000/- in favour of the Chairman of the Board for the manufacturing of certain components using stainless steel, 7-Year National Savings Certificates for Rs. 25,000/- are required to be purchased and pledged in favour of the President of India;
AND WHEREAS the pledge
holder in the instant case is the Assistant Collector who shall hold security
for the utilisation of the excise free godown, the Form No. B2 being the bond
in the form prescribed under the excise manual which was tabled and perused;
"NOW THEREFORE IT IS RESOLVED that twenty-five 7-Year National Savings Certificates of Rs. 1,000/- each be bought in the name of the company and they be and are hereby endorsed in favour of the President of India and pledged through Mr ……a Director of the Company, with the Assistant Collector of Central Excise as security under the Excise Rules together with the necessary bond in Form No. B2 of the Excise Manual for an amount of Rs. 1,50,000/-."
PRACTICE NOTES
1. Power to invest funds of company.-Pursuant to section 292(1)(d), the power to invest the funds
of the company is exercisable on behalf of the company by the Board of
Directors. The words 'investment of funds', in a broader sense, includes almost
every activity requiring application of the company's funds. However, judging
from the tenor of the provisions, the words should be interpreted in a limited
sense of acquiring shares and securities, the application of money in the
purchase of some property from which interest or profit is expected and which
property is purchased in order to be held for the sake of the income which it
will yield. (In re, Wragg, (1919) 2 Ch.
58). The purchase of property for some purpose other than the receipt of income
is not an investment. In re, Power Public
Trustee v. Hastings, (1947) 2 All ER 282:
1947 Ch. 572.
2. Purchase of National Savings Certificates comes within scope of section
292(l)(d).-In the aforesaid case of purchase of National Savings
Certificates, although the purpose of acquiring the certificate is to lodge the
same as security in support of the Bond but nevertheless, this meets the
contention that the income out of these certificates accrues to the company
only and should, therefore, be considered as coming within the scope of section
292(l)(d).
Investment of funds
(Another format)
S. 292(1)(d)-Investment of funds-Board Resolution
"WHEREAS the Government
of Maharashtra proposes to raise 'loan' from the public by the issue of
securities/bonds carrying interest every year;
AND WHEREAS, the Finance
Commissioner, Government of Maharashtra has made an appeal to the Company vide his letter dated the .................2002;
AND WHEREAS the said bonds carry a rate of interest
of per cent per annum being issued
at Rs. 99.50 Ps. (for Rs. 100 Bond) repayable at par in ten years;
NOW THEREFORE IT IS RESOLVED
that Mr. KKW, a Director of the Company, be and is hereby authorised to make an
investment up to an amount of Rs. 75,000/- out of the funds of the
Company in the aforesaid State Government Securities."
PRACTICE NOTES
1. Powers of Board be delegated to others.-The power
of investment of funds of a company exercisable by the Board of Directors under
section 292(l)(d) may be delegated to
others pursuant to the proviso to section 292,
provided a ceiling is fixed by the Board of Directors limiting the
authority so delegated. The resolution, delegating such power to invest, should
be specific with details of securities in which investments are to be made
pursuant to sub-section (3) of this section and the resolution should
also specify the total amount up to which the authorised person may invest the
funds.
Investment of funds
(Another format)
S. 292 (1) (d)-In vestment of funds-Board Resolution
"RESOLVED that subject to the limit of Rs. 20 lakhs at a time and the overall limit of Rs. 60 lakhs, the Managing Director of the Company be and is hereby authorised to invest the surplus funds of the Company in any shares, debentures, securities stock certificates, etc., in any securities floated by the Central Government or any State Government provided that this power shall be exercised subject to the provisions of section 372A of the Companies Act, 1956."
OR
"RESOLVED that surplus
funds of the Company to the extent of Rs.10,00,000/- be invested by
purchasing units of the Unit Trust of India."
OR
"RESOLVED that subject
to the provisions of section 372A of the Companies Act, 1956, the surplus funds
of the Company to the extent of Rs. 5 lakhs be invested in the purchase of
shares, debentures and stock of any public company subject, however, to the
condition that the funds so invested shall not exceed Rs. 30 lakhs at any one
time.
RESOLVED FURTHER that the Managing Director of the Company be and is hereby authorised to sign all documents and to do all such acts and things as may be necessary on behalf of the company."
PRACTICE NOTES
1. Provisions of Section 372A be kept in mind before investing funds.-Keep in mind the provisions of section 372A of the Act before
investment of funds.
2. Bonafide exercise of powers.- The power is to be exercised bonafide in the interest of the company and not malafide to promote personal interest of
Directors.
3. Resolution delegating powers to specify limit of investment.-Delegating power to invest without Ili-nit will be invalid. The
resolution delegating power must specify the limit of investment at any one
time and also fix overall limit of investment.
4 Directors to act bonafide in
interest of company.- Funds are to be invested only in shares of those companies in which
there is reasonable expectation of receiving adequate return from the
investment. In other words, the Directors must act bonafide in the interest of the company while exercising the power.
5. Purchase of property other than receipt of income not investment.-The purchase of property for some purpose other than the receipt of
income is not an investment. Re, Power
Public Trustees v. Hastings, (1947) 2 All ER 282: 1947 Ch 572.
6. Words "invest and
investment"-Meaning.- The words 'Invest and investment, are to be taken
in the business sense of laying out of money for interest or profit. Wamanlal Chota Lal Parekh v. Scindia Steam
Naigation Co. Ltd., (1944) 14 Com Cases 69.
Investment of funds of company in Mutual Fund
S. 292(1)(d)-Investment of funds of the company in Mutual Fund-Board
Resolution
"RESOLVED that a sum of
Rs. 10 lakhs, now remaining uninvested, be invested in Can Bank Mutual Fund,
which investment has the possibility of yielding to the Company a return of
above 30% per annum."
PRACTICE NOTES
1. Resolutions to be passed at a Board Meeting.-In the
case of the following items the board of directors of the company should pass
resolutions only at a meeting held by the board and not by circulation of
resolution provided under section 289 of
the Act:(a) the power to make calls on shareholders in respect of money unpaid
on their shares; (b) the power to issue debentures; (c) the power to borrow
moneys otherwise than on debentures; (d) the power to invest the funds of the
company; and (e) the power to make loans.
2. Delegation of Board's
power.-
Board of Directors of a company can delegate to any committee of directors, the
managing director, the manager or any other principal officer of the company
the following three powers:(a) the power to borrow moneys otherwise than on
debentures; (b) the power to invest the funds of the company; and (c) the power
to make loans.
3. Total amount specified.-The resolution by which
the aforesaid delegation is made by the board of directors should specify the
total amount up to which the funds may be invested and also the nature of such
investment made by the delegatee.
4. Right of the company.-The right
of the company to impose restrictions and conditions on the exercise by the
board of directors of any of the powers given in sub-section
(1) of section 292 of the Act still remains
with it and it can do so by convening a general meeting and passing resolution
Imposing restrictions and conditions on those powers.
Power to make loans
S. 292(l)(e)-Power to make loans-Board Resolution
"RESOLVED that a sum of
Rupees Five lakhs be given on loan to Mr. XYZ, the officer of the Company for
purchase of a house."
OR
"RESOLVED that surplus
funds of the Company be utilised by giving loans not exceeding Rs. 100,000/-
to any employee of the Company and subject to ail overall limit of rupees ten
lakhs outstanding at any one time, for a fixed period not exceeding one year
and carrying a rate of interest of not less than 18% per annum payable at
quarterly rests and that the Managing Director of the Company be and is hereby
authorised to disburse the loans on behalf of the company."
OR
"RESOLVED that Mr. LMN,
the Managing Director of the Company be and is hereby authorised to make loans
to any employee of the Company for utilising the surplus funds of the Company,
at his discretion, within an overall limit of rupees five lakhs outstanding at
any one time and that the loan given to an employee shall in no case exceed Rs.
70,000/-."
PRACTICE NOTES
1. Limit up to which delegatee can make loan to be fixed.-While delegating the powers to
make loan, the lit-nit up to which the delegatee can make loans must be
fixed. Unrestricted delegation is invalid.
2. Power subject to restrictions and limits imposed by Section 372A.-The
power is
subject to the restrictions and the limits contained in section 372A-1 of
the Act.
3. Loans to bodies corporate attract section 372A and loans to
directors section 295-The loans to bodies corporate will also attract section
372A of the Act. Loans to Directors will attract section 295 of the Act.
4. Auditor's duty to check whether loans repaid as per loan agreement.-The
Auditors
will check whether the parties to whom the loans are given have been paying the
principal amount as per conditions stipulated in the loan agreement and have
been regular in payment of interest also, and in cases of default, necessary
action has been taken by the company for recovery of the loan.
Power to make loans
S. 292(l)(e)-Power to make loans-Board Resolution
"RESOLVED that in terms
of Section 292 of the Companies Act, 1956, the Managing Director of the Company
be and is hereby authorised to make loans up to an amount of Rs. 25 lakhs on
such terms and conditions as he may deem fit and proper so as to utilise the surplus
funds of the Company."
PRACTICE NOTES
1. Total amount of loan to be specified.-Every resolution delegating the
power shall specify the total amount up to which loans may be made by the
delegatee, the purpose for which the loans may be made and the maximum amount
of loans which may be made for each such purpose in individual cases.
2. Provisions of section
372A.- The
power is to be exercised subject to the restrictions imposed by Section 372A of
the Companies Act, 1956. The loans, if any, to other bodies corporate will also
have to be in accordance with the provisions contained in section 372A of the
Companies Act, 1956.
3. Requirements under MOCARO.-The Auditor of the Company in
terms of Manufacturing and other Companies (Auditor's Report) Order, 1988 has
to state in his Audit Report as to whether the parties to whom the loans have
been given by the company are repaying the principal amounts as stipulated and
are regular in payment of the interest and , if not, whether reasonable steps
have been taken by the company for recovery of the principal and interest.
Advancing loan
S. 292(1)(e)-Advancing loan-Board Resolution
"RESOLVED that whereas M/s. XYZ & Co. Ltd. has approached the Company for a temporary accommodation for Rs. 25,00,000 for a period of one year carrying interest at the rate of 18 per cent per annum, and whereas the company has a surplus fund to lend on a temporary basis, Mr. VKW, a Director of the Company, be and is hereby authorised to advance up to a maximum of Rs. 25,00,000/- as loan to M/s. XYZ & Co. Ltd. of Bombay, on the security by way of pledging of shares/debenture bonds, the market value of which will adequately cover the amount of the loan to be advanced, carrying interest at the rate of 18 per cent per annum payable monthly.
RESOLVED FURTHER that Mr ……be and is hereby authorised to settle the other terms and conditions of the loan, the repayment period of which shall not exceed one year from the date of the release of the loan by the Company, and the power under section 292(4) of the Companies Act, 1956, be exercisable forthwith subject to the limitations and restrictions contained in section 372A of the said Act."
"RESOLVED FURTHER that
the Company do advance Rs. 10,000/through Mr. DTK, the Factory Manager of the
Thana factory, to tile Workers' Canteen Committee repayable by suitable
installment within a period of two years from the date of disbursement thereof
but without any interest being charged thereon."
"RESOLVED FURTHER that a letter dated the 2002 from Mr. DPC, the Production Manager of the factory at ..................... requesting for a loan of Rs. 35,000/- to assist hire purchase of a car for his personal as well as official use was placed on the table and that the sanction be and is hereby accorded for the payment of Rs. 35,000/- for the aforesaid purpose to Mr. DPC, without interest repayable by way of deduction from his salary at the rate of Rs. 1000/- per month until full recovery is effected of the amount so advanced."
PRACTICE NOTES
1. Resolution delegating powers to specify total amount up to which
delegatee may make loan.-Pursuant to section 292(l)(e), the power to make loan can be
exercised by the Board of Directors on behalf of the company. However, pursuant
to sub-section (4) of the said section, such power may be delegated to
suitable person or persons or to a committee of' the Board. If delegation of'
power on this account is made, which should be done by a resolution adopted in
a Board Meeting, the relevant resolution should specify the total amount up to
which loans may be made by the delegate, the purposes for which the loans may
be made and the maximum amount of loans which may be made for each purpose and
in each individual case.
2. Percentage up to which Board may advance loan or give guarantee
regulated by Section 372A.-The total amount of loan that a company may advance or
guarantee for others is regulated by the provisions of section 372A-1 of
the Companies Act, 1956. The authority of the Board in this regard is limited
to such percentages as may be prescribed by the Govt. from time to time of the
aggregate of the subscribed capital of the lending company and its free
reserves.
3. Limitation imposed by Section 58A on powers of Board.-Pursuant to
section 58A of the Companies Act, 1956, the Board of Directors also has limited
authority up to a ceiling of twenty-five per cent of the aggregate of the
subscribed capital of the borrowing company and its free reserves to accept
unsecured loan or deposit. If a non-banking company opens a current account
with a bank, then it amounts to lending of money by that company and, thus, it
should be made by passing a resolution at a meeting of the Board and not by
circulation.
Making loans
S. 292(1)(e)-Making loans-Board Resolution
"WHEREAS the employees'
welfare association has started construction of flats for employees;
AND WHEREAS these flats,
when built up, will be of the value of not less than Rs. 5 crores,
AND WHEREAS the said
employees' welfare asso6afionnas as~Ke6 for a loan of Rs. 50 lakhs from the
company to help it to complete the construction of the flats;
AND WHEREAS the employees'
welfare association has agreed to mortgage the flats under construction in
favour of the company for securing the aforesaid loan;
NOW T14EREFORE IT IS RESOLVED that an amount of Rs. 50 lakhs be granted as loan to the said employees' welfare association;
RESOLVED FURTHER that the Secretary of the Company shall execute the necessary document for securing the aforesaid loan."
PRACTICE NOTES
See under Resolution No.
674.
Appointment of Allotment/Share transfer committee
S. 292(l) proviso-Allotment/Share transfer committee-Board
Resolution
"RESOLVED that in terms of Article ……of the Articles of Association of the Company, Mr ……and Mr…….. be and are hereby appointed to constitute a committee of the Board of Directors to deal with the allotment of proposed 7,00,000 equity shares of Rs. 10/- each and transfer of shares in general and that such committee shall keep complete records of issue of share certificates under the seal of the Company in the manner required under the Companies (Issue of Share Certificates) Rules, 1960, and comply with the provisions thereof."
PRACTICE NOTES
1. Board may delegate its power to committee.-Subject to the provisions of section 292 of the Companies Act, and subject
to the provisions of the articles, the Board may delegate its power to suitable
committee or committees to deal with the day-to-day handling of
matters and such committee should exercise only those powers delegated to it
and should conform to any limitation imposed on it by the Board.
Adoption of Share Transfer Committee's Report
S. 292(l) proviso-Adoption of Share Transfer Committee's Report-Board
Resolution
"RESOLVED that the transfer of shares of the Company Comprised in the report of the Share Transfer Committee, placed before the meeting and duly initialed by the Chairman be and are hereby noted and confirmed."
1. Routine item in Board
Meeting Agenda.-Adoption of the report of the share transfer committee of the board
specially formed for dealing with share transfers, transmissions, issue of
duplicate and split certificates is a routine item for adoption in the agenda
of a company's board meeting. Such report is adopted at the immediately next
board meeting held after the share transfer committee meeting.
2. Purpose of adoption.-Although there is not
statutory requirement of adopting share transfer committee meetings report at
the board meeting but this is done to make the board members know about the
transfers and transmissions taken place in the company.