Borrowing limits of the company - campanies act, 2013

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

02 September 2016 Sir / Madam,
section 180(1)(c) states that company can borrow upto sum of Paid up capital and free reserves.
If free reserve opening balance is Negative, then it is to be considered for calculation of borrowing limit?
If negative free reserves are more than paid up capital then free reserves to be considered for?

Pratik Shah

Pratik Shah (Expert)
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03 September 2016 Yes, it has to be considered for the purpose of Section 180. If total of paid up capital and free reserves is negative, then Board can not borrow money, unless it takes approval from Members in General Meeting.
However, if your company is private limited company, then as per Notification dated 05th June, 2015, Section 180 is not applicable to pvt companies. So, without taking approval of members, board can borrow money without any limit.