Template of Ordinary Resolution to be passed in a general meeting of the shareholders of a company for considering "Erosion of Net Worth of the Company" as per Section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985 —................................................
Disclaimer: The following resolution and other info are only templates for your reference. Please refer the exact provisions of the relevant enactments, rules made thereunder and other applicable laws to be able to not to miss out anything important while drafting any such resolutions.
SAMPLE
Special Business:
Item No. ...: Considering Erosion of Net Worth of the Company as per Section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985
To consider and if thought fit, to pass with or without modification, the following resolution as an Ordinary Resolution.
“RESOLVED THAT the Report of the Board of Directors of the Company to the shareholders on erosion of more than fifty percent of the Company’s peak net worth during the immediately preceding four financial years by its accumulated losses as on March 31, 20XX and the causes for such erosion, as required under section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985, (“SICA”) be and is hereby considered and approved.
RESOLVED FURTHER THAT in accordance with the requirement of section 23 of the SICA, the Company do report to the Board for Industrial and Financial Reconstruction (“BIFR”) of the fact that the accumulated losses of the Company as on March 31, 20XX have resulted in an erosion of more than fifty percent of its peak net worth during the immediately preceding four financial years.
RESOLVED FURTHER THAT Ms. ...................., Managing Director, Mr. ...................., Company Secretary and Mr. ...................., Chief Financial Officer of the Company be and is hereby severally authorised to send the report to the BIFR and to do all such acts, deeds, matters and things as it may deem necessary, desirable or expedient in relation thereto.
RESOLVED FURTHER THAT the Board be and is hereby severally authorised to delegate all or any of the powers herein conferred by this resolution to any director(s) or to any officer(s) of the Company.”
Explanatory statement under Section 102 of the Companies Act, 2013
Item No. ...: Considering Erosion of Net Worth of the Company as per Section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985
In terms of Section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985 (“the Act”), if the accumulated losses of an industrial company, as at the end of any financial year have resulted in erosion of 50(fifty) percent or more of its peak net worth during the immediately preceding four financial years, such company is required to:
As per the audited annual accounts of the Company for the financial year ended March 31, 20XX approved by the shareholders of the Company in their ...th Annual General Meeting held on ...th ................., 20XX, the accumulated losses of the Company as at 31st March, 20XX is amounting to Rs. ........... and thereby have resulted in erosion of more than 50% of its peak net worth of Rs. ............ during the four financial years preceding the financial year ended March 31, 20XX (calculated as per the provisions of the Act).
A report of the Board of Directors on such erosion and the causes of such erosion is enclosed and forms an integral part of this notice.
Accordingly, this extraordinary general meeting is being convened to consider and approve the enclosed report of the Board of Directors on such erosion and its causes, and the measures being taken as per the relevant provisions of the Act, and also to approve the reporting of such erosion to BIFR in terms of Section 23 of the Act.
Pursuant to Section 102(1) of the Act, the extent of shareholding of Directors, Key Managerial Personnel and their relatives in the Company is provided below:
Name of the Director/KMP/Relative… Shareholding (%)
1. Mr. .................... ....%
2. Mr. .................... ....%
None of the Directors /Key Managerial Personnel of the Company/ their relatives are, in any way, concerned or interested, financial or otherwise, in the said resolution.
The Board recommends consideration of the proposed resolution for your approval as an Ordinary Resolution.
(Annexure to Notice & Explanatory Statement)
REPORT OF THE BOARD OF DIRECTORS TO THE MEMBERS OF .................. LIMITED UNDER SECTION 23(1)(b) OF SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (SICA)
To The Members of
.................. Limited
As required under Section 23(1)(b) of the Sick Industrial Companies (Special Provisions) Act, 1985 (“the Act”), a Report of the Board of Directors to the erosion of more than fifty percent of its peak net worth of the Company and the causes and steps taken for revival thereof, is being submitted to the Members of the Company.
REFERENCE TO BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION (BIFR)
The Board of Directors in its meeting on ..(date).. had approved the audited financial statements of the Company for the year ended 31st March 20XX. In terms of the provisions of the Act, the Company’s accumulated losses stood at Rs. .............., against the peak net worth of Rs. .............., in the immediately preceding four financial years, Hence the Company falls under the definition as a "Potential Sick Company" under the Act.
The Board of Directors in their meeting held on ..(date).. deliberated and analysed the vital reasons behind such erosion. The Board has come to the conclusion that such a situation does affect the sustainability of the Company yet the situation can be taken under control. Some stringent remedial measures will be adopted in the coming days to address this and the performance of the Company will be improved.
CAUSES OF THE EROSION
The major causes leading to the aforesaid erosion in networth are as under :
a) There was an unexpected delay in execution of Project due to ...
b) There was also a delay in obtaining of required working capital which resulted in lower capacity utilization and lower cash flow generation.
c) The new products of the Company did not timely surge in sale due to ........
d) Huge write back of a sum of Rs. ............... in financial year 20xx-xx which was earlier capitalized due to .......................
e) The company has suffered extensive damage and losses due to force majeure events i.e. natural calamities during the year ..........
MANAGEMENT’S OBSERVATIONS AND STEPS TAKEN FOR REVIVAL
The Promoter has infused funds from their own source. The Company is implementing various measures for improvement of the performance in consultation with various stakeholders including State Governments, Banks, Financial Institutions, etc which is expected to result in improved turnover and profitability.
In terms of Section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985 (“the Act”), if the accumulated losses of an industrial company, as at the end of any financial year have resulted in erosion of 50(fifty) percent or more of its peak net worth during the immediately preceding four financial years, such company is required to:
- report the fact of such erosion to the Board for Industrial and Financial Reconstruction (“BIFR”) and
- hold a general meeting of the shareholders of such company for considering such erosion,
- both within 60 days from the date of finalization of the audited accounts, which is the date on which such accounts are adopted at the annual general meeting of the company.
As per the audited annual accounts of the Company for the financial year ended March 31, 20XX approved by the shareholders of the Company in their ...th Annual General Meeting held on ...th ................., 20XX, the accumulated losses of the Company as at 31st March, 20XX is amounting to Rs. ........... and thereby have resulted in erosion of more than 50% of its peak net worth of Rs. ............ during the four financial years preceding the financial year ended March 31, 20XX (calculated as per the provisions of the Act).
A report of the Board of Directors on such erosion and the causes of such erosion is enclosed and forms an integral part of this notice.
Accordingly, this extraordinary general meeting is being convened to consider and approve the enclosed report of the Board of Directors on such erosion and its causes, and the measures being taken as per the relevant provisions of the Act, and also to approve the reporting of such erosion to BIFR in terms of Section 23 of the Act.
Pursuant to Section 102(1) of the Act, the extent of shareholding of Directors, Key Managerial Personnel and their relatives in the Company is provided below:
Name of the Director/KMP/Relative… Shareholding (%)
1. Mr. .................... ....%
2. Mr. .................... ....%
None of the Directors /Key Managerial Personnel of the Company/ their relatives are, in any way, concerned or interested, financial or otherwise, in the said resolution.
The Board recommends consideration of the proposed resolution for your approval as an Ordinary Resolution.
REPORT OF THE BOARD OF DIRECTORS TO THE MEMBERS OF .................. LIMITED UNDER SECTION 23(1)(b) OF SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (SICA)
To The Members of
.................. Limited
As required under Section 23(1)(b) of the Sick Industrial Companies (Special Provisions) Act, 1985 (“the Act”), a Report of the Board of Directors to the erosion of more than fifty percent of its peak net worth of the Company and the causes and steps taken for revival thereof, is being submitted to the Members of the Company.
REFERENCE TO BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION (BIFR)
The Board of Directors in its meeting on ..(date).. had approved the audited financial statements of the Company for the year ended 31st March 20XX. In terms of the provisions of the Act, the Company’s accumulated losses stood at Rs. .............., against the peak net worth of Rs. .............., in the immediately preceding four financial years, Hence the Company falls under the definition as a "Potential Sick Company" under the Act.
The Board of Directors in their meeting held on ..(date).. deliberated and analysed the vital reasons behind such erosion. The Board has come to the conclusion that such a situation does affect the sustainability of the Company yet the situation can be taken under control. Some stringent remedial measures will be adopted in the coming days to address this and the performance of the Company will be improved.
CAUSES OF THE EROSION
The major causes leading to the aforesaid erosion in networth are as under :
a) There was an unexpected delay in execution of Project due to ...
b) There was also a delay in obtaining of required working capital which resulted in lower capacity utilization and lower cash flow generation.
c) The new products of the Company did not timely surge in sale due to ........
d) Huge write back of a sum of Rs. ............... in financial year 20xx-xx which was earlier capitalized due to .......................
e) The company has suffered extensive damage and losses due to force majeure events i.e. natural calamities during the year ..........
MANAGEMENT’S OBSERVATIONS AND STEPS TAKEN FOR REVIVAL
The Promoter has infused funds from their own source. The Company is implementing various measures for improvement of the performance in consultation with various stakeholders including State Governments, Banks, Financial Institutions, etc which is expected to result in improved turnover and profitability.
good draft. thanks
ReplyDeletethank you for the draft resolution , used it for reference in my drafting
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