Company law
Naresh Kumar
(Querist) 06 February 2014
This query is : Resolved
Dear all,
As per section 180(1)(a), of companies act, 2013 corresponding section 293 (1)(a), company has to call general meeting for leasing the whole property.
Please clarify whether the handover the management and operation of the company to another company amounts to Lease or transfer.
Please elobrate with some case laws or supporting documents.
Early reply is highly appreciated
Thanks to all seniors
Naresh
Rajendra K Goyal
(Expert) 06 February 2014
Company can afford legal fees, contact local lawyer.
R.K Nanda
(Expert) 06 February 2014
CONSULT UR CO.LA.
Advocate. Arunagiri
(Expert) 06 February 2014
Now a days, many of the querists are asking for case laws, instead of opinion of the experts.
Naresh Kumar
(Querist) 06 February 2014
Sorry for using wrong wording.. Plz provide some opinion.
Thanks in advance
Advocate. Arunagiri
(Expert) 06 February 2014
I am not able to understand, what do you mean by hand over management and operations.
do you mean the merger or acquisition or any thing else. based on this we will give our opinion.
Naresh Kumar
(Querist) 06 February 2014
Dear Sir
Like in hotel industry, operation nd management by othr party is common phenomena.. In dat respect i m asking.
R.V.RAO
(Expert) 07 February 2014
The new co's act 2013 says under section 180 (1) the Board of Directors of a company shall exercise the following powers only
with the consent of the company by a special resolution, namely:—
(a) to sell, lease or otherwise dispose of the whole or substantially the whole of
the undertaking of the company or where the company owns more than one undertaking,
of the whole or substantially the whole of any of such undertakings.
Explanation.—For the purposes of this clause,—
(i) “undertaking” shall mean an undertaking in which the investment of
the company exceeds twenty per cent. of its net worth as per the audited balance
sheet of the preceding financial year or an undertaking which generates twenty
per cent. of the total income of the company during the previous financial year;
(ii) the expression “substantially the whole of the undertaking” in any
financial year shall mean twenty per cent. or more of the value of the undertaking
as per the audited balance sheet of the preceding financial year;
the restrictions or conditions are also imposed as to how sale proceeds to be used,as subsec (4) says ....
(4) Any special resolution passed by the company consenting to the transaction as is
referred to in clause (a) of sub-section (1) may stipulate such conditions as may be specified
in such resolution, including conditions regarding the use, disposal or investment of the sale proceeds of the transactions.
thank god now that sec 180(1) describes what is undertaking or substantially the whole of the undertaking , as earlier there were many judgements dwelling only on what is an undertaking.see below:
) Undertaking means an enterprise; a unit, a business
as a going concern, the activity of the company
duly integrated with all its components in the form
of assets and not merely some asset of the
undertaking. [ P. S. Offshore Inter Land Services
Pvt Ltd. v. Bombay Suppliers & Services Ltd.
(1991) 5 CLA 376 :(1994) 2 Comp LJ 407 (Bom)].
III) The word 'undertaking' means any business or any
work or project which one engages in or attempts
an enterprise analogous to business or trade. The
business or undertaking must be distinguished
from the properties belonging to the company.
[International Cotton Corporation Ltd. v. Bank of
Maharashtra (1970) 40 Comp Cas 1154 (Mys)].
IV) By the word 'undertaking' is meant the entire
organisation. A company whether it has a plant or
whether it has an organisation is considered as one
whole unit and the entire business of the going
concern is embraced within the word 'undertaking'.
[Rustom Cavasjee Cooper v. Union of India (1970)
40 Comp Cas 325 (SC)]
V) To dispose of means, to get rid of, finish, to deal
with conclusively, to discard, to transfer or give
away, as by gift or sale to, to do away with, to
destroy, to pass over into the control of another; to
alienate or direct the ownership of property; etc.
Disposition means the transfer of property by some
act of its owner, e.g. by sale, gift, will, or
exchange.
"In reality the undertaking is a complete and complex weft and the various types of business and assets are threads which cannot be taken apart from the weft.'
. It appears that the undertaking means a 'unit', a business or a project. Each factory of a company may be considered as a separate undertaking.
In R. C. Cooper v. Union of India : [1970]3SCR530, the Supreme Court was considering the meaning of the word 'undertaking' as used in the Bank Nationalisation Statute of 1969.
The above-referred observation, though not directly an interpretation of section 293(1)(a) of the Act is of some assistance in finding out the true meaning of the word 'undertaking' used in section 293(1)(a) of the Act. It appears to me that, for the purpose of section 293(1)(a) of the Act, all the capital assets of the undertaking taken together would be embraced by the expression 'undertaking' ………
…… If, after disposal of practically all the capital assets of a company, what remains is only the husk of the assets, it would be perhaps difficult to take the view that, merely, assets of the undertaking were disposed of and not the undertaking itself. It is, therefore, possible to take a view that the board of directors cannot dispose of 'all the capital assets of the company' taken together which will denude the company of its business or will leave merely the husk left behind" ………,
now we need not dig into plethora
of all those distinguished judgements as to what is undertaking for purpose of sec 293(1)(a).
if the triggers or thresholds set out in the new sec 180(1) given above are met ,yes directors need to seek shareholder approval by spl. resolution.
investment, exceeding 20% of net worth as per audited B/S is the criterion for an undertaking.
it is not the jargon/criteria of lease/disposal/sale/operation etc.. but whether the shareholders consent by spl. resolution for the activity in the best interest of the company,subject of course to limits of investment/networth triggers laid down in the section itself,the directors can go ahead.
if the minority shareholders are aggrieved,there is always ,the legal recourse available.
Guest
(Expert) 07 February 2014
Well advised by Mr.R.V.Rao and your query is in regard to Leasing which is Legal.
Raj Kumar Makkad
(Expert) 08 February 2014
No more to add as expert KV Rao has wisely advised to you.
Naresh Kumar
(Querist) 08 February 2014
Dear R.V. Rao Sir
Thanks a lot dear sir for your valuable note.
It means any agreement which is done by the company which leads to pay more than 20% revenue of the company as per last balances heet to the newly appointed manager (as in my case handing over the management and operation of the company), it requires Spcl resolution
R.V.RAO
(Expert) 08 February 2014
Mr.Naresh,welcome.
your earlier query and my reply was on sec. 180(1).
now your query is on managerial remuneration governed by sec. 196 ,sec 197 and sch v .
pl. inform if it is public ltd./pvt.ltd co. ,listed or unlisted.,and exact designation etc....
( Also details of tenure and remuneration etc... if you know.).this helps in answering the query.
thanks.
