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Sec 186- unanimous consent

Swati Sharma (TRAINEE) (328 Points)

29 May 2015

Dear Friends,

As per sec 186 of Co' Act 2013, unanimous consent i.e consent of all directors is required to pass reso for advancing loan and investing in securities.

My query is what if unanimous consent is not there, what shall be the validity of such resolution.

Kindly guide

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3 Replies

CS Rahul Kabra (CS) (141 Points)
Replied 29 May 2015

According to Section 186 (5) If a company proposes to make an investment or advance loan or provide security in connection with a loan to other body corporate or person below 60% of its paid up share capital and free reserves and securities premium account, then there must be unanimous consent of all Directors (present in the meeting). Further prior approval of financial institution is required, if the term loan is subsisting.

As this provision clearly states there must be unanimous consent of all Directors present in the meeting for the purpose of investing or advancing loan or security in connection with a loan to other body corporate or person. The resolution will not be valid if there is no unanimous consent of all Directors (present in the meeting)

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Nayan Medic (Professional + Student) (323 Points)
Replied 23 May 2023

About Unanimous Resolution Under Companies Act, 2013

A unanimous resolution refers to a voting process used by a board of directors to make decisions on specific matters. It occurs when all the directors who attend a duly convened board meeting agree and vote in favor of a particular agenda item. In such a resolution, every director present at the meeting has the power to exercise their voting rights as granted by the Companies Act, 2013, and they all reach a unanimous agreement on the issue at hand. This means that every director in attendance supports and votes in favor of the proposed agenda, resulting in a resolution that carries the complete consensus of the board.

Under the Companies Act, 2013, there are certain sections that require unanimous board resolutions for specific actions. These sections include:

Section 203: This section pertains to the appointment or employment of a managing director or manager who is already serving in the same role in one company (not more than one). According to this section, such an appointment must be made or approved by a resolution passed at a board meeting with the consent of all the directors present. In other words, unanimous agreement from all the directors attending the meeting is required to appoint or employ a person as a managing director or manager in such circumstances.
Section 186: This section applies when a company provides a loan, guarantee, or security in connection with a loan to another body corporate or acquires securities of another body corporate within the limits specified in Section 186. If a company intends to undertake any of these actions, it can only do so with the consent of all the directors present at the board meeting. This means that unanimous agreement from all the directors in attendance is required for the company to provide a loan, guarantee, or security in connection with a loan or acquire securities of another body corporate within the specified limits.
Section 73: This section relates to companies that have issued deposits and have already circulated a circular to its members regarding such deposits. If a company wishes to remove the trustee associated with those deposits, it cannot do so without the consent of all the directors present at the board meeting. In this case, unanimous agreement from all the directors attending the meeting is necessary to remove the trustee associated with the issued deposits.

Jatin Bajaj (CS) (2930 Points)
Replied 25 May 2023

Unanimous resolution means the resolution passed by the Board of Directors present at the meeting. There are some sections mentioned in the Companies law where unanimous resolution is required. Where there is no unanimous resolution, the resolution shall be deemed to be invalid.