372A INTER-CORPORATE LOANS & INVESTMENTS (1) No company shall, directly or indirectly, (a) Make any loan to any

other body corporate; (b) Give any guarantee, or provide security for a loan; & (c) Acquire, by way of subscription or otherwise securities, exceeding 60% of paid-up share capital & free reserves, or 100% of free reserves, whichever is more: Provided loans & investments so far made, guarantee or security so far provided to, exceeds the aforesaid limits, no investment or loan shall be made or guarantee or security shall be provided unless previously authorised by a special resolution. Provided Board may give guarantee, without a special resolution, if, (a) A resolution is passed in the meeting of the Board authorising to give guarantee; (b) Exceptional circumstances prevent from passing a special resolution; & (c) Resolution under clause (a) is confirmed within 12 months, in a general meeting or AGM held immediately after Board's resolution, whichever is earlier Provided that the notice of resolution shall indicate particulars of investment proposed to be made or loan or security or guarantee to be given, purpose & such other details. (2) No loan or investment shall be made or guarantee or security given unless a resolution sanctioning it is passed at Board meeting with consent of all the directors present & prior approval of public financial institution, where any term loan is subsisting, is obtained Provided that prior approval of a public financial institution shall not be required where the aggregate of the loans & investments does not exceed 60% limit, if there is no default in repayment of loan instalments or payment of interest: (3) No loan shall be made at a rate of interest lower than prevailing bank rate. (4) No company, which has defaulted in complying section 58A, shall, directly or indirectly, make any loan or give any guarantee or security. (5) Every company shall keep a register for every investment or loan made, guarantee given or security provided, within 7 days with name, amount & date. (6) It shall be kept at registered office & open to inspection & extracts may be taken by any member (8) Shall not apply to a banking co./an insurance co./a finance co./a company providing infrastructural facilities; share trading co.; a private co.; any loan/guarantee or investment made by a holding co. to its wholly-owned subsidiary ; (9) If default in complying sec other than sub-sec (5), company & every officer shall be punishable with imprisonment up to 2 years or with fine up to 50,000 rupees: Provided if repaid in full, no punishment shall be imposed, & if repaid in part, the maximum punishment shall be appropriately reduced Provided further that all persons who are knowingly parties to any such contravention shall be liable, jointly & severally, to the company for the repayment of the loan
(10)

If default in complying sub-sec (5), company & every officer shall be punishable with fine up to 50,000 rupees & also with a further fine up to 500 rupees per day during which default continues.

Managing Director A person entrusted with any powers of management, otherwise not exercisable, by him. He may be appointed by an agreement with co. or resolution of BOD, or resolution in AGM, or MOA, or AOA. His appointment is automatically terminated if he ceases to be a director due to disqualification or because of his retirement by rotation. It is obligatory for every public company having a paid-up share-capital of ` 5 crores or more to appoint either a managing or whole time director or a manager. There can be more than 1 MD in a company on functional basis. But usually there is only 1 MD in a company of moderate size in which he is the CEO of the company. Appointment of managing or whole time director or manager to require Government approval in certain cases only: If the condition specified in Schedule XIII are fulfilled, a managing or whole time director or manager in public company can be appointed, reappointed without the approval of CG. A return in the prescribed form no. 25-C is, however, required to be filed within 90 days. If not, an application seeking approval of the appointment must be made to the CG within 90 days. The CG shall not accord its approval unless it is satisfied that: (a) The proposed managing or whole time director of the company is a fit & proper person & the appointment is not against public interest; (b) The terms & conditions are fair & reasonable; CG is also empowered to accord approval to appointment for a period less than period proposed. If not approved by CG the appointee shall vacate office immediately on communication of the decision by CG, otherwise punishable with fine up to ` 5,000/- for every day after that. When the CG is, prima-facie, of the opinion that any appointment made without its approval has been made in contravention of the requirement of Schedule XIII, the CG may render the letter to the Company Law Board for decision. If the Company Law Board comes to the conclusion that such contravention has occurred, the appointment shall come to an end on the date of such declaration & the person so appointed shall, in addition to being liable to pay a fine of `1,00,000 refund to the company the entire amount of salaries & perquisites etc., received by him. However, all the acts of the managerial personnel, whose appointment is invalidated, will be deemed to be valid. Restrictions on Appointment: An individual cannot be MD or manager of more than 2 companies, public or private, where out of 2 atleast 1 is a public company. An individual may hold the office of MD or manager in any number of private companies. Terms of Office: The term of office of a MD must not exceed 5 years at a time. The term, however, may be extended for further period not exceeding 5 years at a time. It is important to note that the person ceases to be MD with a seisure of directorship on account of his retirement by rotation at the AGM. But if such a person is re-elected as director at the AGM & thereby he continues as the director of the company, he shall continue as a MD also for the period for which he is so elected by the AGM & for the unexpired period of present term of appointment as MD. Disqualifications for appointment: Shall not appoint or continue the appointment of a person as managing or whole time director who is: (a) An undischarged insolvent or has at any time been adjudged insolvent; (b) Suspended payment to his creditor or has made a composition with them; or (c) Has at any time been convicted of an offence involving moral turpitude.