RR Limited has decided to make investment in other companies for ₹50 lakhs, which is in excess of 60% of the company's paid-up share capital, free reserves and securities premium account. Company has 5 directors. Four di

In accordance with the provisions of the Companies Act, 2013, as contained in section 186(5), no investment shall be made or loan or guarantee or security given by the company unless the resolution sanctioning it is passed at a meeting of the Board with the consent of all the directors present at the meeting and the prior approval of the public financial institution concerned where any term loan is subsisting, is obtained. Further, under the provisions of section 186(2) and 186(3), the loan amount must not exceed 60% of its paid-up capital, free reserves and securities premium account or 100% of free reserves and securities premium account, whichever is more. In case, the company wishes to exceed the said limit, prior approval of company through special resolution would be acquired. In the given case, in absence of adequate information, even if we assume that ₹50 lakh does not exceed the 100% of free reserves and securities premium account, RR limited has not complied with the provisions of section 186(5) of the Companies Act, 2013 where consent of all the directors present is required. The resolution of the Board of Directors therefore, is not valid and has no legal effect.