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Special Resolution: Sale of Undertaking under Section 180(1)(a)

In accordance with clause (a) of sub-section (1) of section 180 of the Companies Act, 2013, in order for a company,

 "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".

special resolution under section 180(1)(a) of the companies act 2013The consent of both Board of Directors by passing of a board resolution and the consent of the members of the company by a special resolution are necessary.

Here,
(a) “undertaking” means an undertaking in which the company's investment exceeds 20% of its net worth as per the audited balance sheet of the preceding financial year or an undertaking which generates 20% of the total income of the company during the previous financial year;

(b) “substantially the whole of the undertaking” in any financial year means 20% or more of the value of the undertaking as per the audited balance sheet of the preceding financial year.

Template of such a special resolution is provided hereunder—

SAMPLE

#. Transfer or sell or otherwise dispose of ...................... Unit to ................. Limited [CIN: .....................] as a going concern on a slump sale basis.

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

“RESOLVED THAT, pursuant to the provisions of section 180(1)(a) of the Companies Act, 2013 read with relevant rules made thereunder, and any other applicable provisions, including any modification(s) thereto or re-enactment(s) thereof for the time being in force, subject to the provisions of the Memorandum and Articles of Association of the company and subject to such other approvals, sanctions, consents and permissions as may be necessary to be obtained, the consent of the members of the company be and is hereby accorded to the Board of Directors of the company (hereinafter referred to as the "Board" which term shall include a Committee thereof), to sell or transfer or otherwise dispose of as a going concern by way of slump sale (as defined in Section 2(42C) of the Income-tax Act, 1961) the undertaking, namely, ‘................ Unit’ together with all assets and liabilities including employees, contracts, licences, permits, rights, obligations, consents and approvals relating to the said undertaking ("Business Undertaking"), to ................... Limited (CIN: ............................) ("the buyer"), at such consideration, with effect from such date, in such manner and on such terms and conditions as may be deemed appropriate and decided by the Board, with the power to the Board to finalize and execute all the required documents, memoranda, deeds of assignment/conveyance and any other incidental documents with such modifications as may be required from time to time.”

“FURTHER RESOLVED THAT the Board be and is hereby authorized to execute any documents, deeds or writings as may be necessary to be executed in relation to the transfer and vesting of the Business Undertaking and to make applications to the regulatory and governmental authorities for the purpose of obtaining all approvals and sanctions as required to be obtained by the company in this regard.”

“FURTHER RESOLVED THAT the Board be and is hereby authorized to do all acts and deeds as may be necessary, proper, desirable and/or expedient to give effect to this resolution, to settle any questions, difficulties or doubts that may arise in regard to such sale/disposal and transfer of the Business Undertaking as they may in their absolute discretion deem fit and as may be necessary for the completion of the transaction as aforesaid in the best interest of the company.”

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

Item No. ...

The members of the company are requested to note that as per section 180(1)(a) of the Companies Act, 2013 ("the Act"), the Board of Directors of a company ("the Board") can exercise the power to sell, lease or otherwise dispose of the whole or substantially the whole of any undertaking(s) of the company, only with the prior approval of the members of the company by way of a special resolution.

As per Explanation (i) & (ii) of section 180(1)(a) of the Act:
i. “undertaking” means an undertaking in which the company's investment exceeds 20% of its net worth as per the audited balance sheet of the preceding financial year or an undertaking which generates 20% of the total income of the company during the previous financial year;
ii. “substantially the whole of the undertaking” in any financial year means 20% or more of the value of the undertaking as per the audited balance sheet of the preceding financial year.

Your company has identified its ‘................... Unit’ as ‘substantial’ in terms of section 180(1)(a) of the Companies Act, 2013 and therefore requires members’ approval by way of ‘Special Resolution’ for disposal of the said business undertaking.

With the growing cut-throat competition in the market, the Board is of the view that it will be better for the company to focus its attention on only one of the business undertakings i.e. ........... Unit, out of the two undertakings the company has now, and hence the company should sell, transfer, or dispose of the other business undertaking i.e. ........... Unit.

Your company had invited bids from several companies to buy the said .......... Unit, and ...................... Limited (CIN: .................................) (the Buyer) has shown interest in buying the ‘............. Unit’ on a slump sale basis and had bid highest amount to buy it. ....................... Limited. The Board believes that the proposed Buyer being a reputed business establishment in the field of ..................., should be able to run the business of ................ Unit efficiently.


The Board at its meeting held on ...(Date)... accorded its approval to restructure the business model of the company to adopt a more focused approach and utilize the management attention to grow to their full potential and create value for the company in the overall interest of all the stakeholders. The net proceeds from the sale of the ‘.................. Unit’ will be utilized to repay the existing loans and reduce interest burden, or enhancement of Unit capital of the company for general business purposes.

None of the Directors and Key Managerial Person (KMP) or their respective relatives is interested financially or otherwise in the resolution set out at item no. .... of the accompanying notice.

The Board commends the resolution set out at item no. ... for approval of the members by means of a special resolution.




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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.

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