General Circular No. 04/2014, Dated: 25/03/2014

Subject: Clarification with regard to section 180 of the Companies Act, 2013.

This Ministry has received many representations regarding various difficulties arising out of implementation of section 180 of the Companies Act, 2013 with reference to borrowings and/or creation of security, based on the basis of ordinary resolution. The matter has been examined in the Ministry and it is hereby clarified that the resolution passed under section 293 of the Companies Act, 1956 prior to 12.09.2013 with reference to borrowings (subject to the limits prescribed) and / or creation of security on assets of the company will be regarded as sufficient compliance of the requirements of section 180 of the Companies Act, 2013 for a period of one year from the date of notification of section 180 of the Act.

No. 1/32/2013- CL V (Pt. File)

Yours faithfully,

(KM Narayanan)

Assistant Director (Policy) Ph. no. 23387263

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0 responses to “Clarification with regard to section 180 of Companies Act, 2013”

  1. Harish Singhania says:

    Friends,

    Directors interest is to be disclosed in the first board meeting of the financial year as per new companies act 2013. I am director of 20 companies and shareholder in 25 pvt ltd company. If after 6 months I sale shares of5 companies I have to inform all the companies and they have to again file necessary form with Roc. Filing fees and professional fees to be paid. Is it not a punishment to other companies. Why this law.

  2. PC Agrawal says:

    Whether MCA will be able to smoothly switch over to the new Act?

    Friends,

    It seems something is not well in MCA these days. You take any notification or circular starting from 12th September 2013 notification, there are issues on the same. It seems notifications and circulars are just being issued without any proper homework and taking care of their probable effect keeping the industry and professionals in a confusing state. MCA has till date not specified which sections of CA 1956 are corresponding to the 98 sections of CA 2013 notified on 12.9.2013 which have ceased to be in force now and under which provision of law. Though the list has been prepared by authors of private books, but it has no legal base and could be disputed. The notification also includes certain sections which cannot be implemented since the relevant rules have not yet been notified. Section 185 has created lot of confusion inspite of issuing circulars which have no meaning.

    Now latest case is with circular issued on Section 180 on 25th March 2014, i.e. after over 6 months of its notification.

    We know that Section 293(1) contained 5 clauses (a) to (e) providing for various matters for which approval of members was required by way of ordinary resolution in public company. Now Sections 180 and 181 of CA 2013 these matters which are also applicable to private companies. Clauses (a) to (d) are covered in Sec.180 whereas clause (e) is covered in Sec.181. It has been opined in various forums that considering provisions of General Clauses Act, resolutions passed by companies u/s 293 will be valid under CA 2013 also even though Sec.465 making such specific provision has not been notified so far. Govt has power u/s 470 to issue order for removal of difficulties, but the same has not been used on this issue.

    MCA could have well issued a general order u/s 470 giving list of corresponding sections of CA 1956 which are no more operative and stating that Sec.465 will apply in relation to such provisions mutatis mutandis until it is notified which could have taken care of all issues. However, in yesterday’s circular it has been ‘clarified’ that resolutions passed u/s 293 for borrowing and creating security [i.e. clauses (a) & (d) of Sec.293(1) of CA 1956] will be valid for one year of notification of Sec. 180 of CA 2013.

    Following questions arise:

    1. Clarification has been issued only for sub-clauses (a) and (d) of Sec.293(1) of CA 2013. What about other 3 sub-clauses [i.e. (b), (c) and (e)]?

    2. If it is just a clarification, from where the cap of 1 year period has come in the circular?

    3. Whether MCA wants to give message that this relaxation has been given only for specific case for sub-clauses (a) and (d) only and hence any resolutions passed under any provisions of CA 1956 will not be valid under CA 2013? Whether companies will be required to again pass resolutions and file returns for appointment of all existing directors, CS etc. under CA 2013 and there will be no migration of existing data to new platform?

    4. If MCA has given relaxation in this case, under which section this power has been exercised is not mentioned.

    Now questions are being raised on ability of MCA team to smoothly switch over to the new Act. Let God help all of us.

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