Board Resolution for Obtaining Loan for Company

A company may have to borrow to obtain loan for various business reasons. While obtaining loan, the company must follow certain standards to ensure compliance with the Companies Act, 2013. In this article, we look at the procedure for executing board resolution for obtaining loan for company in India.

Board Meeting & Filing MGT-14 for Loan

For a company to excise its borrowing powers as per the MOA and AOA, it must be approved by a meeting of its Board of Directors or a Committee of Directors. Hence, a calling and holding of Meeting of the Board of Directors must first be completed. In the Board Meeting, the Board may, delegate the borrowing powers and authority to sign documents pertaining to the loan application to a committee of directors, the managing director, a manager or any other officer of the company. On signing of the Board Resolution, the company must file e-Form MGT-14 to approve the proposed borrowing.

Form MGT-14 must be digitally signed by a Company Secretary or a Director of the Company or CFO or CEO and uploaded to the MCA, after it is certified by a Company Secretary or Chartered Accountant or Cost Accountant in practice.

Delay in Filing MGT-14

Any resolution passed by a company according consent to exercise of any powers by its Board of Directors, must be filed with the Registrar of Companies within 30 days of passing of the resolution. In case of delay in filing of MGT-14 within 30 days of passing of resolution, then the company and every officer of the company in default can be punished with a fine of upto Rs.10,000. Further if the contravention is a continuing one, then an additional penalty of Rs.1000 for every day may also be levied.

In addition to the 30 day period, an additional time of 270 days is provided for filing of MGT-14. Hence, if the company fails to file a MGT-14 with the ROC after a time limit of 300 days, then the form cannot be filed unless the delay is condoned by the Central Government.

In cases, where the delay in filing of MGT-14 has exceeded 300 days, the company shall be punishable with a fine which shall be not less than Rs. 1 lakh and extend to Rs. 5 lakh. Further every officer who is in default may also be punishable with a fine of not less than Rs.25000 which can extend to Rs.1 lakh.

Board Resolution Format for Bank Loan

The Company has received a sanction letter dated ............... from ...........(name of Bank) in connection with grant of various credit facilities to the Company. The sanction letter received was placed before the meeting and after consideration thereof: RESOLVED that the Company can obtain various credit facilities by way of overdrafts, cash credits, term loan, pre-shipment and post-shipment credit, opening of letter of credit, issuing of guarantees including deferred payment guarantees and indemnities, negotiation and discounting of demand and or usance bills and cheques inland as well as foreign and such other facilities as may be agreed upon from time to time, between the Bank and Company. FURTHER RESOLVED THAT to request.................(name of Guarantor if) to furnish the required guarantees to the Bank for the various credit facilities granted to the Company and offer their personal immovable properties as a collateral security against borrowing by the Company. FURTHER RESOLVED THAT ...........of the Company is hereby authorized to appear at the Bank and deposit all the title deeds of the Company's immoveable properties and to make a declaration on behalf of the Company that the said deposit has been made with intent to create security by way of mortgage thereon in favour of the Bank. FURTHER RESOLVED THAT the enclosed security documents, received under cover of the Bank's aforementioned letter and which have been placed before the meeting be and are hereby approved for execution by the Company in accordance with the Articles of Association of the Company. FURTHER RESOLVED THAT ................of the Company is hereby authorized to execute the necessary security documents required by the Bank in this connection and that the common seal of the Company be affixed wherever necessary in the presence of .......................of the Company in terms of Articles of Association of the Company in terms of the Bye-laws of the Company.