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Advances from holding company

CS Ekta (Company Secretary) (309 Points)

12 March 2010

Hi Friends,

Can a Board of Directors of a company delegate the power to one of its committee to take advances from it holding Company for the purpose of investment in land?

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3 Replies

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 12 March 2010

Hi,

As per my understanding the board of directors of your subsidiary Company:

1. want to take loan from its holding.

2. want to delegate power to one of its committee.

3. want to invest the money in land.

According to me this delegation is possible. But terms of reference of such committee must include such power. Finance committee is an appropriate name for such committee.

Regards

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CS Ekta (Company Secretary) (309 Points)
Replied 12 March 2010

The Board is planning to enter into agreements / MOU with the Holding Company. The main features of the agreement are:

the Subsidiary Company will purchase lands which will be developed by the Holding Company. The Holding Company will mobilize the fund required for the purchase.

Therefore, the advances to be given is not be considered as loan.

The Board of the Subsidiary Company wants to authorise the executive committee to take advances from the holding company for this purpose.

Kindly guide

HARDIK (COMPANY SECRETARY NCFM (Corporate Governance )) (664 Points)
Replied 12 March 2010

Hi As per section 295 Holding company can give loan to its subsidiary and under section 292 can give authority to board committee of directors to invest the fund of the company.