A need to obtain a loan for various business reasons may arise anytime. Hence, it is a common practice to borrow loan for investing in or running a business. However, what most people are not aware about is the fact that a company needs to follow certain standards in order to comply with Companies Act, 2013.
An entire procedure of executing board resolution to obtain loan for a company is followed in India. This procedure includes filing e-form MGT-14 for loan and holding board of directors’ meeting. Let us look at the procedure for obtaining loan for a company in India in detail.
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Filing e-Form MGT-14 for Loan and Passing Board Resolution
A company can exercise its borrowing powers mentioned in MOA and AOA. In order to exercise its borrowing powers, the approval of its committee of directors or board of directors is needed. Hence, a meeting of the board of directors for the same reason should be held and called. It is up to the board to decide whether it wants to delegate the borrowing powers to a committee of directors, a manager, the managing director, or any other company officer and authorize any one of them to sign loan application documents. After the board resolution has been signed, the company is required to file e-Form MGT-14 in order to acquired approval for the proposed borrowing.
The next step involves digitally signing of e-Form MGT-14 and getting it certified by a company secretary or CFO or CEO or a director of the company and uploading it to the MCA.
Consequences of Delay in Filing e-form MGT-14
A company is required to file the resolution passed by its board of directors with the ROC(registrar of companies) within 30 days of the passing of the resolution failing to which the company, as well as each and every company officer, will be liable to pay a fine of up to Rs. 10,000. Apart from a period of 30 days, a time of 270 days is provided additionally for the filing of MGT-14. However, if the company fails to comply with aforementioned norms with the ROC after 300 days time limit, the form can be filed only at the discretion of the central government.
If a company fails to file the resolution or agreement under sub-section(I) before the expiry of the period specified under section 403 with additional fees, the company shall be fined with a penalty of an amount not less than 5 Lakh rupees which might extend to 25 Lakh rupees and every officer including the liquidator of the company, if any, shall be punished with a penalty of not less than 1 Lakh Rupees which can be further extended to 5 Lakh rupees.