Section 372A of the Companies Act, 1956 outlines the conditions under which a company can make loans, acquire securities, or provide guarantees, stipulating that prior board approval or a special resolution is required depending on the amount involved. It permits certain relaxations, such as allowing guarantees exceeding the ceiling limit under specific conditions, and applies to specific types of companies while excluding financial and insurance firms. Non-compliance can result in penalties and the transactions being declared void and ineffective.

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