XYZ Ltd., a company, has a paid-up share capital of ₹ 60 crores and free reserves of ₹ 25 crores. It desires to make a loan of ₹ 20 crores to M Ltd. The company XYZ Ltd. has already made investments in many other compani

No company shall, directly or indirectly give any loan to any person or other body corporate exceeding 60% of its paid-up share capital, free reserves and securities premium account or 100% of its free reserves and securities premium account, whichever is more unless the same is previously authorised by a special resolution passed in a general meeting. In the given case, XYZ Ltd. cannot grant loan above 100% of ₹ 25 crore, i.e., ₹ 25 crore or 60% of ₹ (60+25) crore i.e., ₹ 51 crore, whichever is more. Since the company has already made investment and given loans to the extent of ₹ 35 crore therefore a further loan of ₹ 20 crore shall require the approval of shareholders.