The Board of Directors of ABC Ltd. has agreed in principle to grant loan of ₹6 crores to XYZ Ltd. : ABC Ltd. has provided the following information : Authorised Share Capital: ₹15 crores Paid up Share Capital: ₹10 crores

Section 186 (2) of the Companies Act, 2013 provides that, no company shall directly or indirectly: (a) give any loan to any person or other body corporate; (b) give any guarantee or provide security in connection with a loan to any other body corporate or person; and (c) acquire by way of subscription, purchase or otherwise, securities of any 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. Section 186(3) of the Companies Act, 2013 provides that where the aggregate of the loans and investment so far made, the amount for which guarantee or security so far provided to or in all other bodies corporate along with the investment, loan, guarantee or security proposed to be made or given by the Board, exceed the limits specified under section 186(2), no investment or loan shall be made or guarantee shall be given or security shall be provided unless previously authorised by a special resolution passed in a general meeting. In view of the above provisions, it is to determine that whether special resolution is required to be passed in the general meeting, before granting loan of ₹6 crores to XYZ Ltd. As per section 186(2) of the Companies Act, 2013, the limits for the loan and investment will be the amount whichever is more of the following (1) 60% of paid up share capital, free reserves and securities premium account = ₹9 crores (2) 100% of free reserves and securities premium account = ₹5 crores Hence, the limit will be ₹9 crores as for loans and investments made and to be made being more of the following: Since the company has already given loans of ₹3 crores and has made investment of ₹2 crores in the shares of other companies and further agreed to grant loan, of ₹6 crores to XYZ Ltd. will exceed limit of ₹9 crores, hence prior approval by special resolution in the general meeting will be required to be passed by ABC Ltd in terms of Section 186(3). Further, in terms of Section 117(3)(a) of the Companies Act, 2013, the Special Resolution so passed by ABC Ltd shall also be required to be filed with the MCA in E form MGT-14 within 30 days of the passing of the said Special Resolution.