Section 62- Further Issue of Share Capital

- Issue to increase subscribed share capital to persons

o Existing shareholders
 Time for applying for shares- min 15 days and max 30 days
 Can be renounced to others
o Employees through way of ESOP
o Any other person by the way of special resolution for cash or consideration other
than cash.
- Notice for atleast 3 days before opening of such issue
- Shall not apply to increase in share capital by exercise of option to convert debenture or
loan to shares of the company, provided that such terms of option have been approved
before issuance of such debenture/loan (special resolution)
- Except, any loan/debenture issued to government considers it in public interest to do so. In
case such terms are not acceptable to the company, it must appeal to the tribunal within 60
days from issuance of such order.

Section 71- Debentures

- May issue debentures with option to convert to shares at time of redemption by passing
special resolution
- No voting rights to debentures
- Debenture Redemption Reserve (DRR) must be created
- Cannot issue a prospectus/make an offer or invitation to the public or its members
exceeding 500 unless one or more debenture trustees has been appointed
- Where any debenture trustee comes to a conclusion that the assets of the company are
insufficient or likely to become insufficient to discharge the principal amount, he/she may
file a petition with the Tribunal, which may impose such restrictions on the incurring of any
further liabilities.
- If the company fails to redeem its debentures on the maturity date or fails to pay interest,
the tribunal may, upon application by one or all of debenture-holders, order the company to
redeem the debentures (principal and interest) due thereon.

Section 73- Prohibition on acceptance of deposits from public

- Shall not apply to a banking and non-banking financial company

- Can accept deposits from its members after passing resolution in general meeting subject to
fulfilment of following conditions
o Issuance of circular including
 Statement of financial position of the company,
 Credit rating
 Total number of depositors and amount due with respect to previous
deposits
 Any other particulars
o Filing a copy of the circular within 30 days before the date of issue of circular
o Deposition on or before 30th April of each year, not less than 20% of deposits
maturing in following financial year (separate bank account in scheduled bank called
Deposit repayment reserve account) which cannot be used for any other purpose
other than repayment of deposits
 o Certifying that company has not committed any default in repayment of deposits or
payment of interest
 If any default has occurred then the company has made good and 5 years
have passed from the date of making good of such default
o Providing security, including creating a charge on the property or assets of the
company
o In case of unsecured deposits, such shall be mentioned on every circular, form and
advertisement
o Where a company fails to repay the deposit or interest, the depositor me apply to
the tribunal directing the company to pay the sum or any loss or damage incurred

Section 185- Loan to Directors

- No company shall advance any loan, directly or indirectly to

o Any director and partner or relative of such director of the company or a director of
its holding company or
o Any firm in which such director is partner or relative of director is partner
- A company may advance any loan to entity in which director of the company is interest
subject to special resolution passed in the general meeting
o Provided that full disclosure of particulars, guarantee or security provided and the
purpose for which such loan is to be utilised shall be explained in the notice of the
meeting
o Such loan is utilised by the borrowing company for its principal business
- Entities in which director is interested includes
o Private company where he is director/member
o Body corporate in which director has not less than 25% of voting power or control
by one or more directors together
- This will not apply to loan to managing or whole-time director given as part of conditions of
service (which are extended to all employees) pursuant to special resolution by members
- Will also not apply to company which gives loans or guarantees or securities in ordinary
course of business at the same rate as that of prevailing yield of government security.
- Any loan or security made by holding to wholly owned subsidiary
- Any guarantee or security made for loan given by bank or financial institution to its
subsidiary
- If loan given is provided or utilised in contravention of provisions
o Fine: min 5L, max 25L
o Officer: imprisonment 6 months, fine: min 5L, max 25L
o Director to whom loan advanced or guarantee or security given, imprisonment
6months and fine 5L-25L

Section 186- Loan and investment by company

- Can make investment without prejudice to not more than 2 layers of investment company
- Except if a company is acquiring a foreign company with more than 2 layers as per laws of
such country
- Except a subsidiary having any investment subsidiary for meeting requirement of law of
under any law or rule
- A company shall not give any loan, guarantee or security on loan to any person or body
corporate including by way of acquiring, purchase or acquisition exceeding 60% of its paid
 up share capital, free reserves and securities premium or 100% of its free reserves and
securities premium
- When such limit is exceeded no investment or loan shall be made or guarantee shall be
given unless previously passed in special resolution.
- For guarantee or security, prior approval of the public financial institution concerned is also
required
- No company that is listed, shall take inter-corporate loan or deposits exceeding the
prescribed limit
- No loan shall be given at a rate less tha prevailing yield of government security
- No company with default in previous loans may give new loan or guarantee or security till
such default persists
- Register with all particulars to be maintained, which shall be open to inspection at such
office.
- Upon contravention
o Fine: 25,000 to 5L
o Office: imprisonment which may extend to 2 years, fine: 25000 to 1L
o