Venus Hospitality Limited is an unlisted public company. The following information is given as per the financial statements of the company as on 31 st March, 2023 : Paid-up capital: ₹5 crore Security premium: ₹2 crore Re

Section 180(1)(c) of the Companies Act, 2013 restricts the borrowing powers of the Board of Directors. The powers to borrow has to be exercised by the Board in a duly convened Board Meeting. The Board cannot borrow beyond its authority as stipulated by the Articles of Association of the company and by the Act. Section 180(1) prescribes that the Board shall, inter alia, borrow money, where the money to be borrowed, together with the money already borrowed by the company will exceed the aggregate of the paid-up capital, free reserves and security premium only with the consent of members in a general meeting by passing a special resolution. In the instant case, the aggregate of paid-up capital and free reserves and security premium of the company is 5 + 2 + 1 = ₹8 crore. As the company already has an outstanding long-term loan of ₹8 crore, no further loan can be borrowed just by passing a Board Resolution. To borrow any further sum, the approval of members by a special resolution is necessary. Thus, as Venus Hospitality Limited is a public company, the Board Resolution is not valid as per the above mentioned provisions. If the company is a private limited company, as per exemption given vide Notification dated 05/06/2015 the private companies are exempted from complying with the requirements of Section 180 of the Act. Even then the company cannot borrow a further sum of ₹5 crore as in this case as, the Articles provide that the company cannot borrow beyond its net worth. The net worth of the company is 5 + 2 + 1 = ₹8 crore. Revaluation reserve is not taken into account for ascertaining the net worth of a company as per Section 2(57). The long-term loan outstanding is ₹8 crore. Hence, the company cannot borrow the additional loan of ₹5 crore as the stricter provisions of Articles will prevail even if it is a private company.