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CS Professional · Corporate Restructuring, Valuation and Insolvency · Acquisition of Company or Business

Kaveri Ltd, a company with no term loan from any public financial institution, wants to make an investment in another body corporate as part of an acquisition. The investment is within the section 186(2) limits. Which Board approval requirement applies to the resolution sanctioning it?

The investment must be sanctioned by a resolution passed at a Board meeting with the consent of all directors present. A simple majority is insufficient, and a members' special resolution is needed only if the prescribed limits are exceeded.

  1. APassed at a Board meeting with the consent of all directors presentCorrect
  2. BPassed by simple majority of directors present
  3. CPassed by circulation only, with majority consent
  4. DPassed by special resolution of members in every case

Explanation

Section 186(5) requires the resolution sanctioning an investment to be passed at a Board meeting with the consent of all the directors present. A simple majority is not enough. Members' special resolution is needed only when the limits are exceeded.

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