Study the following case/situation and express your opinion.DDS financial plans to raise 10 crores by issuing secured non-convertible debentures. However, as per the Articles of Association, the - Secretarial Practice

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Short Note

Study the following case/situation and express your opinion.
DDS financial plans to raise 10 crores by issuing secured non-convertible debentures. However, as per the Articles of Association, the board of directors have authority only to raise up to 5 crores. They are also considering whether to go for private placement or make public offer. Please advise them on the following:
Is the proposed issue within the borrowing powers of the board?

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Solution

No. The proposed issue is not within the borrowing powers of the board. The board can use their borrowing power up to limit permitted by Articles of Associations. In case, the Board wants to increase its borrowing power, they have to get approval from shareholders by passing a special resolution in general meeting.

Concept: Procedure for Issue of Debentures
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