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      Question

      SQ Ltd. is a public company with a total sanctioned

      Board strength of six directors. Five directors are present at a duly convened Board meeting to deliberate on a proposal for the investment of company funds. Pursuant to the provisions of Section 186 of the Companies Act, 2013, under what condition shall the resolution for the said investment be deemed as passed?
      A If a simple majority (three out of five) of the directors present at the meeting vote in favour. Correct Answer Incorrect Answer
      B If a special majority (four out of five) of the directors present at the meeting vote in favour. Correct Answer Incorrect Answer
      C If all the five directors present at the meeting give their unanimous consent to the resolution. Correct Answer Incorrect Answer
      D If the resolution is passed by the unanimous consent of the total sanctioned strength of the Board (all six directors). Correct Answer Incorrect Answer
      E If the resolution is passed by a majority of the directors present, provided at least one Independent Director is part of the majority. Correct Answer Incorrect Answer

      Solution

      As per Section 186 (5), Companies Act 2013 (Loan and Investment by Company), any resolution for making an investment, giving a loan, or providing a guarantee/security must be passed at a meeting of the Board with the  unanimous consent of all the directors present at the meeting.   Note that if the company has already taken a loan from a PFI, the prior approval of that PFI is also required unless the investment is within the limits specified in Section 186(2) and there is no default in repayment.   As per Section 186 (2), the investment limit is 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.

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