Section 180 of the Companies Act, 2013 corresponds to section
293 of the companies Act, 1956. Section 293 of the Companies Act, 1956 was applicable only to public
companies i.e. private limited companies were exempted from this requirement
and therefore they could borrow any sums of money up to any limit without the
need of seeking any approval from the members of the company. Now, Section 180
is applicable to all companies i.e. public as
well as private. So now onwards even
private companies have to seek the approval of their members if they are
intending to borrow monies in excess of their paid up share capital and free
reserves.
According to
section 180(1)(c) –
The Board of directors of a company shall exercise the following power
only with the consent of the company by a Special Resolution (SR):
Borrowing of money if –
Money already borrowed, together with moneys proposed to be
borrowed will exceed the aggregate of paid-up share capital and free
reserves
*
‘Temporary
loans’ obtained from company’s bankers in the ordinary course of business are not considered
as borrowings.
*
‘Temporary
loans’ means:
-
loans repayable
on demand; or
-
loans repayable within 6 months of the date of the loan.
*
However,
‘temporary loans’ does not include loans raised for financing capital
expenditure.
*
If the Board
borrows money in excess of the limits imposed under section 180(1)(c)
of the Companies
Act, 2013 shall not be valid and effectual against the company, unless the
lender proves that –
(a) he lent the
money in good faith; and
(b) he lent the
money without having any knowledge that the limit imposed under section 180(1)(c) of the Companies Act, 2013 had
been exceeded.
*
SR passed by the
members shall specify the total amount upto which moneys may be borrowed by the
Board.
*
If SR passed by
the members does not specify the maximum amount which can be borrowed by the
Board, SR shall be void.
Contributed by Shruti Agarwal
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