Manohar Motors Ltd. has a paid-up share capital of ₹10 crore and free reserves of ₹5 crore. The Board of directors want to borrow a sum of ₹20 crore for its long-term capital requirements from the market. Discuss whether

In terms of Section 180(1)(c) of the Companies Act, 2013, a company can borrow money, where the money to be borrowed, together with the money already borrowed by the company exceeds aggregate of its paid up share capital and free reserves, only with the consent of company by special resolution. Temporary loans obtained from the Bankers are not to be considered while calculating the limits. [Proviso to section 180(1)(c)] In this case under consideration, we should see if the Articles of Association of Manohar Motors Ltd. allow such borrowings. If not, company should alter its articles to provide for the same. The company should hold a general meeting in which a special resolution be passed authorising the Board of Directors to borrow money up to ₹20 crores. As this limit exceeds the paid-up capital of ₹10 crores and free reserves of ₹5 Crores (Total ₹15 Crores), a special resolution is required. The other requirements to be complied with inter alia include provisions in the Articles of Association, holding BOD meeting to decide special resolution to be passed, approving notice of General Meeting, draft of special resolution and also Explanatory statement thereto, holding General Meeting by giving 21 days clear notice, getting the special resolution passed and filing the same with the ROC within 30 days, after this the BOD can go ahead to borrow up to ₹20 Crores. The resolution of the Board of Directors should be passed at a meeting. Section 179(3)(d).