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Format of Special Resolution for Creation of Charge on Assets

special resolution for creation of chargeSection 180 of the Companies Act, 2013 has put certain restrictions on the powers of the Board of Directors to be exercised by them only with the consent/permission from the members (shareholders) of that Company.

One of such restrictions is to seek the approval of the shareholders by passing a special resolution at their general meeting to create charge on properties and assets of the Company upto a certain limit.

NOTE: The resolution sample(s) here is only for reference, to help you with drafting. Do refer the exact provisions of the Act, relevant rules framed thereunder and any other applicable laws to be able to not to miss out anything important while drafting.

Templates of such special resolutions are as follows —

SAMPLE #1

#. Creation of Charge on the Assets

To consider and if thought fit to pass, with or without modification, the following resolution as a Special Resolution:

“RESOLVED that pursuant to the provisions of Section 180(1)(a) and any other applicable provisions of the Companies Act, 2013, including any statutory modification(s) or amendment(s) thereto or re-enactment(s) thereof for the time being in force, consent of the members be and is hereby accorded to create such charge, mortgage, pledge, hypothecation, sell, transfer and/or otherwise dispose of all or any part of the immovable and movable properties, tangible and intangible assets of the Company, wherever situated, present and future, and in such manner as the Board of Directors may deem fit, together with the power to take over the substantial assets of the Company in certain events in favor of lenders, banks/financial institutions, trustees and other investing agencies for the holders of debentures/bonds/other instruments to secure rupee currency loans and/or foreign currency loans and/ or the issue of debentures/bonds whether partly/fully convertible or non-convertible (herein collectively referred to as the "Loans") provided that the aggregate amount of loans together with the interest thereon, additional interest, compound interest, liquidated damages, commitment charges, premia on pre-payment or redemption, costs, charges, expenses and all other monies payable by the Company in respect of the said Loans, shall not at any time exceed INR .........  (Indian Rupees ......................... only) viz., INR ...................... (Indian Rupees ................. only) as non-fund based limits and INR .......................... (Indian Rupees ..................... only) as fund based limits.

FURTHER RESOLVED that the Board be and is hereby authorized to do all such acts, deeds, things and matters to execute all such agreements, instruments and any other documents, as may be required and to delegate all or any of its powers herein conferred to a Committee constituted/to be constituted by the Board and/ or any Member of such Committee with power to the said Committee to sub-delegate its powers to any of its Members for the purpose of giving effect to this Resolution.”

Explanatory Statement pursuant to Section 102 of the Companies Act, 2013 :-

In order to achieve higher growth, the Company is taking part in more business opportunities. In some of these cases, the Company has to submit bank guarantees during the bidding process. The readiness to provide the bank guarantees on time is of essence to secure the contracts. Hence, it is proposed to enhance the borrowing limits from INR ............. to INR ......................, out of which the Fund based limit is INR .............. and Non-fund based limit is INR .................... With the increase in borrowing limits, it is also required to empower the Board to create charge on properties of the Company to secure the limits from banks or other financial institutions.

The Board commends the resolution at Item No. ... for approval by the members.

None of the Directors, Key Managerial Personnel or their respective relatives are in any way concerned or interested, financially or otherwise in the foregoing resolution at Item No. ... of the Notice.



SAMPLE #2

#. Approve the limits under Section 180 (1) (a) of the Companies Act, 2013

To consider and, if thought fit, to pass the following resolution as a Special Resolution:

“RESOLVED THAT consent of members of the company be and is hereby accorded, pursuant to Section 180(1)(a) and any other applicable provisions of the Companies Act, 2013, (including any statutory modification(s) or re-enactment thereof for the time being in force), to the Board of Directors of the Company to pledge, mortgage, hypothecate and/or charge all or any part of the movable or immovable assets of the Company and the whole or part of the undertaking of the Company of every nature and kind whatsoever and/or creating a floating charge in all or any movable or immovable properties of the Company and the whole of the undertaking of the Company to or in favour of banks, other financial institutions, investors and any other lending agencies or trustees including debenture trustees to secure the amount borrowed by the Company or any third party from time to time for the due payment of the principal and/or together with interest, charges, costs, expenses and all other monies payable by the Company or any third party in respect of such loans and borrowings provided that the total indebtedness secured by the assets of the Company does not exceed INR ....................... (Indian Rupees ......................only) at any time.

FURTHER RESOLVED THAT the securities to be created by the Company as aforesaid may rank prior / pari passu / subservient with / to the mortgages and /or charges already created or to be created in the future by the Company or in such other manner and ranking as may be thought expedient by the Board and as may be agreed to between the concerned parties.

FURTHER RESOLVED THAT the Board of Directors be and is hereby authorized to do all such acts, deeds, things and matters as it may in its absolute discretion consider proper, expedient or desirable for the purpose of giving effect to the foregoing resolution and further to settle any question, difficulty or doubt that may arise in this regard.”



SAMPLE #3

#. Approval for Creation of Charge on the Properties of the Company

To consider and, if thought fit, to pass with or without modification(s), the following Resolution as a Special Resolution:

“RESOLVED THAT in supersession of the Resolution passed at the ..th Annual General Meeting of the Company held on (Date) and pursuant to the provisions of Section 180(1)(a) and any other applicable provisions of the Companies Act, 2013 and Rules made thereunder, as amended from time to time, and subject to such other approvals/permissions as may be necessary, consent of the members of the Company be and is hereby accorded to the Board of Directors of the Company (the "Board") to create such charges, mortgages and hypothecations in addition or supplemental to the existing charges, mortgages and hypothecations, if any, created by the Company, on its movable and immovable properties, both present and future, and in such manner as the Board may deem fit, in favour of banks, other financial institutions and lending agencies or bodies/ security trustees/ agents, for the purpose of securing any borrowing, loans and/or advances already obtained or that may be obtained, together with interest, all other costs, charges and expenses and other moneys payable by the Company to the concerned Lenders, up to a sum of INR ............................ (Indian Rupees ......................... only).

FURTHER RESOLVED THAT the Board be and is hereby authorised to finalise with Banks/other financial institutions the documents for creating aforesaid charge and/or the mortgage and to do all such acts, deeds, things and matters as may be necessary, proper and expedient or incidental for giving effect to this resolution.”

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