This article presents a Notice of Extraordinary General Meeting (EGM) for a company, highlighting the special business to be transacted. The notice covers resolutions related to borrowing money, ratifying loans and guarantees, and authorizing the board for investments and loans. Explanatory statements are included to provide additional information and context for each resolution.
The notice outlines three resolutions to be discussed and voted upon during the EGM. The first resolution pertains to borrowing money in excess of the paid-up share capital, free reserves, and securities premium under Section 180(1)(C) of the Companies Act, 2013. The second resolution focuses on ratifying loans, guarantees, or securities made by the company to individuals in which any director of the company is interested, as per Section 185(2) of the Act. The third resolution seeks to authorize the board for making investments, providing loans or guarantees, and offering security under Section 186 of the Companies Act, 2013.
Explanatory statements are included for each resolution to provide a rationale and background information. They outline the financial stress faced by the company, the need for immediate funds, and the regulatory requirements for obtaining shareholder approval. The statements also address the Company’s support for entities within the group, the limitations imposed by Section 185, and the strategic objectives for investments and loans. Shareholders attending the EGM will have a comprehensive understanding of the proposed business and its significance for the company.
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Format of Notice of EGM to transact business as Special Business with explanatory statements
NOTICE IS HEREBY GIVEN THAT EXTRA- ORDINARY GENERAL MEETING OF THE MEMBERS OF (Company Name) WILL BE HELD ON ………………………. AT 02.00 P.M. AT THE REGISTERED OFFICE OF THE COMPANY SITUATED AT – …………………………TO TRANSACT THE FOLLOWING BUSINESS:-
SPECIAL BUSINESS-
1. TO BORROW MONEY IN EXCESS OF PAID- UP SHARE CAPITAL, FREE RESERVES AND SECURITIES PREMIUM UNDER SECTION 180(1)(C) OF THE COMPANIES ACT, 2013
To consider, and if thought fit, with or without modification(s), to pass the following resolution as Special Resolution:
“RESOLVED THAT pursuant to provisions of Section 180(1) (C) of the Companies Act 2013, including any statutory modification(s) or re-enactment(s) thereof for the time being in force and applicable provisions if any and subject to the approval of shareholders in the general meeting, the consent of the shareholders be and is hereby give to borrow money with or without security up to Rs. __________________from banks/financial institutions and any other person(s) on such terms and conditions as the board of directors may think fit, where the money(ies) if already borrowed by the company (apart from temporary loans obtained or to be obtained from the company’s banker in the ordinary course of its business), may exceed the aggregate of the paid up share capital, free reserves and securities premium of the company, (reserves not set apart for any specific purpose) subject to condition that the total amount of money(ies) in aggregate so borrowed shall not at any any time exceed the limit of _______________
2. TO RACTIFY THE LOANS, GUARANTEE OR SECURITY MADE BY THE COMPANY TO PERSON IN WHOM ANY OF THE DIRECTOR OF THE COMPANY IS INTERESTED UNDER SECTION 185 (2) OF COMPANIES ACT, 2013:
To consider, and if thought fit, with or without modification(s), to pass the following resolution as Special Resolution:
“RESOLVED THAT pursuant to provisions of Section 185 (2) and all other applicable provisions, if any, of the Companies Act, 2013 read with Companies (Amendment) Act, 2017 and rules made thereunder (including any statutory modification(s) or re-enactment(s) thereof for the time being in force), the consent of the members of the Company be and is hereby accorded to ratify the advances of loan including any loan represented by a book debt, or give any guarantee or provide any security in connection with any loan taken by any entity, in which directors of the company are interested, up to an aggregate sum of _____________ (including the loans already advanced, guarantee already provided), in their absolute discretion deem beneficial and in the interest of the Company, provided that such loans, advances, securities and/or corporate guarantee, as the case may be, are utilized by the borrowing company for its principal business activities only”.
3. TO AUTHORISE BOARD FOR MAKING OF ANY INVESTMENT/ GIVING ANY LOAN OR GUARANTEE/ PROVIDING SECURITY UNDER SECTION 186 OF COMPANIES ACT, 2013:
To consider, and if thought fit, with or without modification(s), to pass the following resolution as Special Resolution:
“RESOLVED THAT pursuant to the provisions of Section 186 and all other applicable provisions, if any, of the Companies Act, 2013 (the ‘Act’) read with The Companies (Meetings of Board and its Powers) Rules, 2014 (including any statutory modification(s) or re-enactment(s) thereof for the time being in force), and subject to such approvals, consents, sanctions and permissions as may be necessary, the consent of the Members of the Company be and is hereby accorded to the Board of Directors of the Company (hereinafter referred to as ‘the Board’ which term shall be deemed to include any Committee which the Board may have constituted or hereinafter constitute to exercise its powers including the powers conferred by this Resolution) to:
- make loans from time to time on such terms and conditions as it may deem expedient to any person or other bodies corporate;
- give on behalf of any person, body corporate, any guarantee, or provide security in connection with a loan made by any other person to, or to any other person by anybody corporate; and
- acquire by way of subscription, purchase or otherwise the securities of any other body corporate,
as they may in their absolute discretion deem beneficial and in the interest of the Company up to an aggregate sum of __________________ notwithstanding that the aggregate of loans and investments so far made, the amounts for which guarantee or security so far provided to, along with the investments, loans, guarantee or security proposed to be made or given by the Board may exceed sixty per cent of its paid-up share capital, free reserves and securities premium account or one hundred per cent of its free reserves and securities premium account, whichever is more as prescribed under Section 186 of the Companies Act, 2013.
“RESOLVED FURTHER THAT the Board be and is hereby authorized to negotiate the terms and conditions of the above said investments, loan(s), security(ies) or guarantee(s) as they deem fit and in the best interest of the Company and take all such steps as may be necessary to complete the same.
Place: _________ FOR OR ON BEHALF OF COMPANY
Date: __________
_____________
Director
(DIN: ________)
NOTES:
1. An Explanatory Statement pursuant to Section 102 of the Companies Act, 2013 (“Act”) setting out material facts concerning the Special business under Item No. 1& 2 of the Notice, is annexed hereto.
2. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT PROXY/ PROXIES TO ATTEND AND VOTE ON POLL IN THE MEETING INSTEAD OF HIMSELF/ HERSELF AND THE PROXY NEED NOT BE A MEMBER OF THE COMPANY. A PERSON CAN ACT AS A PROXY ON BEHALF OF MEMBERS NOT EXCEEDING FIFTY (50) AND HOLDING IN THE AGGREGATE NOT MORE THAN TEN PERCENT OF THE TOTAL SHARE CAPITAL OF THE COMPANYCARRYING VOTING RIGHTS. A MEMBER HOLDING MORE THAN TEN PERCENT OF THE TOTAL SHARE CAPITAL OF THE COMPANY CARRYING VOTING RIGHTS MAY APPOINT A SINGLE PERSON AS PROXY, PROVIDED THAT SUCH PERSON SHALL NOT ACT AS PROXY FOR ANY OTHER PERSONOR SHAREHOLDER.
3. The instrument appointing the Proxy in order to be effective, should be duly stamped, filled, signed and must be deposited at the Registered Office of the Company not less than 48 hours before the commencement of the meeting.
Place: _________ FOR OR ON BEHALF OF COMPANY
Date: __________
_____________
Director
(DIN: ________)
EXPLANATORY STATEMENT PURSUANT TO SECTION 102(1) OF THE COMPANIES ACT, 2013
The following Statement sets out all material facts relating to the Special Business mentioned in the accompanying Notice:
ITEM NO. 01
The company is under financial stress due to slow down of the automotive market and adverse cash flow. The company is managing hard to maintain its operations smooth. The bankers has issued overdue notice to the company for immediate re-payment of outstanding dues. The company also facing re-payment problem in loan secured from the bank and others. The creditor also demanding the long outstanding due since long time. The non- payment of dues and outstanding of creditors may cause a serious implication on the financial operations and legal front.
In view of above the company needs to raise a sufficient fund immediately from banks and other. The directors, their relatives and inter- corporate firms may also be required to infuse the fund to meet the liability towards re-payment of existing loan and working capital for operation.
The Ministry of Corporate Affairs (MCA), New Delhi vide their Notification No. 2754 dated September 12, 2013 had notified inter-alia the applicability of provisions of Section 180(1)(c) and Section 180(1)(a) of the Companies Act, 2013 with effect from September 12, 2013, which stipulates obtaining prior approval of the Shareholders of the Company by way of Special Resolution for exercising the specified powers of the Board of Directors relating to borrowing of the Company respectively.
Accordingly, in order to borrow money for the purpose of company exceeding the aggregate of the paid up share capital, free reserves and securities premium of the company, (reserves not set apart for any specific purpose) and ensure necessary compliances of the provisions of the Companies Act, 2013, the Board of Directors, hereby proposes to borrow money exceeding aggregate of its paid up share capital and free reserves, to these abovementioned entity upto an aggregate amount of Rs. ______________________
The Board recommends the Special Resolution set out at item no. 1 of the Notice for approval by the Members.
None of the Directors and Key Managerial Personnel of the Company and their relatives is in any way concerned or interested, financially or otherwise in the resolution except to the extent of their directorship and shareholding in the body corporate(s) in which investment may be made or loan/ guarantees may be given pursuant to this special resolution.
ITEM NO. 2
The Company is expected to render support for the business requirements of other companies in the group (i.e. entities in which directors of the Company are interested as per the provisions of section 185 of the Companies Act, 2013), from time to time. However, owing to certain restrictive provisions contained in the Section 185 of the Companies Act, 2013, the Company was unable to extend financial assistance by way of loan, guarantee or security to other entities in the Group.
In the light of amendments notified, inter-alia replacing the provisions Section 185 of Companies Act, 2013, the Company with the approval of members by way of special resolution, may advance any loan including any loan represented by a book debt, or give any guarantee or provide any security in connection with any loan taken by any person in whom any of the director of the company is interested in respect of loans taken by such entities, for their principal business activities.
Accordingly, in order to meet the funding requirements and ensure necessary compliances of the provisions of the Companies Act, 2013, the Board of Directors, hereby proposes to grant loans or provide guarantee/security to these abovementioned entity upto an aggregate amount of Rs. _____________.
Hence, in order to enable the company to advance loan including any loan represented by a book debt, or give any guarantee or provide any security in connection with any loan taken by any person in whom any of the director of the company is interested to any entity of the group, in which Directors of the company are interested directly or indirectly under section 185 of the Companies Act, 2013 requires approval of members by a Special Resolution.
The Board recommends the Special Resolution set out at item no. 2 of the Notice for approval by the Members.
None of the Directors and Key Managerial Personnel of the Company and their relatives is in any way concerned or interested, financially or otherwise in the resolution except to the extent of their directorship and shareholding in the body corporate(s) in which investment may be made or loan/ guarantees may be given pursuant to this special resolution.
ITEM NO. 03
In order to make optimum use of funds available with the Company and also to achieve long term strategic and business objectives, the Board of Directors of the Company proposes to make use of the same by making investment in other bodies corporate or granting loans, giving guarantee or providing security to other persons or other body corporate or as and when required.
In accordance with the provisions Section 186 of the Companies Act, 2013 (the ‘Act’), it would be necessary to obtain the approval of the members for:-
- making loans to any person or other bodies corporate;
- giving guarantee or provide security in connection with a loan to any other bodies corporate or person; and
- acquiring by way of subscription, purchase or otherwise, the securities of any other body corporate, in excess of the limits of:
1. 60% of the paid-up share capital and free reserves and securities premium account; or
2. 100% of the free reserves and securities premium account; whichever is higher.
Considering the long-term business plans of the Company, which requires the Company to make sizeable loans / investments and issue guarantees / securities to persons or bodies corporate, from time to time, prior approval of the Members is being sought for enhancing the limit up to an aggregate sum of Rs. ______________
No loan shall be given under this section at a rate of interest lower than the prevailing yield of one year, three year, five year or ten year Government Security closest to the tenor of the loan.
The Board recommends passing the Special Resolution set out in Item No. 3 for the approval of members.
None of the Directors and Key Managerial Personnel of the Company and their relatives is in any way concerned or interested, financially or otherwise in the resolution except to the extent of their directorship and shareholding in the body corporate(s) in which investment may be made or loan/ guarantees may be given pursuant to this special resolution.
Place: _________ FOR OR ON BEHALF OF COMPANY
Date: __________
_____________
Director
(DIN: ________)
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