Applicability of Section 293
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
24 December 2010
HI ALL
My company has been recently converted from private to public, the Company had already execeeded it borrowing limits as per the sec 293, and there was no resolution passed before. Pl explain the course of action applicable in my case after its being a public limited company, including the time frame within which it has to be complied with.
My company has been recently converted from private to public, the Company had already execeeded it borrowing limits as per the sec 293, and there was no resolution passed before. Pl explain the course of action applicable in my case after its being a public limited company, including the time frame within which it has to be complied with.
24 December 2010
Hi...
The Company was a Private Limited Company when it was borrowing funds (other than the Temporary Loans borrowed from Company's Bankers in the ordinary course of business) in excess of the aggregate of the paid up capital and free reserves of the Company and hence the provisions of section 293(1)(d) were not applicable to it at the time of borrowing.
Now, the Company has been converted into a Public Limited Company and will have to comply with the provisions of section 293(1)(d) of the Companies Act,1956. Now, before borrowing any amount the Company should obtain the consent of the members by way of an Ordinary Resolution tobe passed in the General Meeting to borrow in excess of the aggregate of the paid up capital and free reserves.
After being converted into a Public Company, the amount of funds proposed to be borrowed by the Company together with the funds already borrowed by the Company will be in excess of the aggregate of the paid up capital and free reserves of the Company and before such funds are borrowed, approval of the members will have to be obtained.
This is my personal opinion and views of eminent experts are welcome...
God Bless
Udit Sharma
The Company was a Private Limited Company when it was borrowing funds (other than the Temporary Loans borrowed from Company's Bankers in the ordinary course of business) in excess of the aggregate of the paid up capital and free reserves of the Company and hence the provisions of section 293(1)(d) were not applicable to it at the time of borrowing.
Now, the Company has been converted into a Public Limited Company and will have to comply with the provisions of section 293(1)(d) of the Companies Act,1956. Now, before borrowing any amount the Company should obtain the consent of the members by way of an Ordinary Resolution tobe passed in the General Meeting to borrow in excess of the aggregate of the paid up capital and free reserves.
After being converted into a Public Company, the amount of funds proposed to be borrowed by the Company together with the funds already borrowed by the Company will be in excess of the aggregate of the paid up capital and free reserves of the Company and before such funds are borrowed, approval of the members will have to be obtained.
This is my personal opinion and views of eminent experts are welcome...
God Bless
Udit Sharma
27 December 2010
After conversion, when the company goes for further loan if it is found that the funds to be borrowed together with funds already borrowed exceeds the limit specified in Section 293(1)(d), then at that time the approval of members in General Meeting is to be obtained.
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