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Unsecured Loan

Vani.A (CS) (168 Points)

09 June 2011

Hi Friends,

A public limited company has a paid up capital of 64 Lakhs and reserves & surplus is 40 Lakhs and it has got unsecured loans from promoters & directors for Rs. 76.56 lakhs...

Does Section 293(1)(d) attracts here...

Kindly advice

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6 Replies

CA Mahesh (...) (70 Points)
Replied 09 June 2011

HI... Vani.A

According to my view, in ur case 293(1)(d) is not applicable .

As per u/s 293(1 (d) of Companies Act , where the moneys to be borrowed, together with the moneys already borrowed by the company (apart from temporary loans obtained from the company's bankers in the ordinary course of business), will exceed the aggregate of the paid-up capital of the company and its free reserves, that is to say, reserves not set apart for any specific purpose;

I assumed that the total borrowing in ur case is rs.76.56 ( borrowed plus to be borrowed) and in the reserve & surpluse there is no any specifuc reserve.

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rachit jain (chartered accountant ) (635 Points)
Replied 09 June 2011

sec 293(1)(D)will only attract if borrowing money together with the money already borrowed(apart from temporary loan) is in excess of the paid up capital and free reserve.

so if there is no other borrowing then sec 293(1)(D) will not attract.

CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 09 June 2011

Originally posted by : rachit jain
	sec 293(1)(D)will only attract if borrowing money together with the money already borrowed(apart from temporary loan) is in excess of the paid up capital and free reserve. so if there is no other borrowing then sec 293(1)(D) will not attract.

AGREED

Vani.A (CS) (168 Points)
Replied 10 June 2011

Friends,

To make my question clear. The Company has unsecured loans from promoters and directors only(76.56 lakhs). There is no other loans from Banks or Financial Institutions. It is same from 2005. But for this year, for compliance certificate, our Practising Company Secretary asks for 293(1)(d) resolution..

When we asked that it is only unsecured loans and it is within limits of paid up capital (64 lakhs) and Reserves & Surplus (40 lakhs). For this they told that we may missed out last years and 293(1)(d) applies and it should be made this year.

Your valuable advice please

CA Mahesh (...) (70 Points)
Replied 10 June 2011

Hi..

Vani A

As per the section 293(1)(d) loans includes all types of loan i.e secured / unsecured .

In ur case , section293 (1)(d) is not applicable, but as per the section 292 there is certain powers to be exercised by the board only at the board meeting. So as per the section 292(1)(c) board can borrow money up to certain limit {i.e as per section 293(1)(d) } , by passing a resoluation at the board meetinng.

If u missed the board resolution for the last year (2005) , then u can apporved it at the board meeting thereafter also.

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rachit jain (chartered accountant ) (635 Points)
Replied 10 June 2011

Originally posted by : CA Mahesh
	Hi.. Vani A As per the section 293(1)(d) loans includes all types of loan i.e secured / unsecured . In ur case , section293 (1)(d) is not applicable, but as per the section 292 there is certain powers to be exercised by the board only at the board meeting. So as per the section 292(1)(c) board can borrow money up to certain limit {i.e as per section 293(1)(d) } , by passing a resoluation at the board meetinng. If u missed the board resolution for the last year (2005) , then u can apporved it at the board meeting thereafter also.