Sec. 372 A
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Sec. 372 A

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Sec. 372A. I presented during 65th Batch of GMCS course in The Institute of Chartered Accountants of India

Sec. 372A. I presented during 65th Batch of GMCS course in The Institute of Chartered Accountants of India

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  • 1.  
  • 2. Sec. 372A Created by R. SHIVA SHANKARA Companies Act, 1956
  • 3. SCOPE
    • Making a loan
    • Acquiring the securities
    • Giving any guarantee or providing any securities
  • 4. Higher Level
    • Lower Level
  • 5. Ceiling Limit
    • 60% of the aggregate of paid-up share capital & Free Reserve
    • OR
    • 100% of free reserves of the company
        • Higher of the above
  • 6. Lower Level
    • Approval of the Board
        • Prior approval
        • Resolution passed at a Board Meeting
        • Can not be delegated
        • Unanimous approval
  • 7. Higher Level
    • Special resolution in General Meeting
  • 8. Special Resolution AGM EGM Postal Ballet
  • 9. Notice of Special Resolution
    • Specific limit
    • Particulars of other Body Corporate
    • Purpose
    • Specific Sources of Funding
    • Other relevant details
  • 10. No Blanket Permission
    • Notice must specify the specific securities in which the investments are proposed to be made.
    • Department Circular No. 8/99 dt. 04.06.1999
  • 11. Relaxation
    • Board may give guarantee in excess of ceiling limit without passing a special resolution subject to following conditions.
        • Within 12 months from the date of guarantee
        • Immediate next AGM or GM
        • Whichever is earlier
  • 12. Other Conditions
    • No default u/s. 58A of Companies Act, 1956
    • Rate of Interest shall not be less than prevailing bank rate.
  • 13. No approval from Financial Institutions
    • The aggregate of loan, investment, guarantee or security already made & proposed does not exceed 60% of paid-up share capital & free reserve
    • There is no default in repayment of loan principle and interest.
  • 14. Not Applicable to
    • Banking, Insurance & investment company
    • Housing finance company
    • Financing industrial enterprises or infrastructure facilities.
    • Private company which is not subsidiary or holding company of public company.
    • Right issue
    • Loan or guarantee made by holding company to 100% subsidiary company
    • Acquisition of shares of subsidiary company
  • 15. Register u/s. 372A
    • Name of body corporate
    • Amount, Date, Terms & Purpose
    • Time limit – within 7 days
    • Place – Registered office
    • Rights of Members – inspect & extracts
    • Consequences of default – Rs. 5,000/- and Rs. 500/- per day
  • 16. Non-Compliances of Sec. 372A
    • Transaction void & ineffective.
    • Repayment of the loan.
    • Company & every officer in default shall be punishable with
        • Fine up to Rs. 50,000/- OR
        • Imprisonment up to 2 years OR
        • both
  • 17. THANK YOU
    • R. SHIVA SHANKARA