Special Resolution investment in Preference Shares section 186

For a company, authorisation/prior approval of its members by way of a special resolution passed in a general meeting is required, where the giving of any loan or guarantee or providing any security or investments by way of subscription/purchase of securities of any other body corporate exceeds the limits specified i.e. 60% of its paid up capital, free reserves and security premium account or 100% of its reserves and security premium, whichever is more.

Refer section 186 of the Companies Act, 2013 to understand the provisions in detail in this regard.

Special resolution for investment in preference shares of another company as per section 186 is given hereunder for your reference—

SAMPLE

To consider and if thought fit, to pass, with or without modification(s), the following resolution as a Special Resolution:

“RESOLVED THAT pursuant to the provisions of Section 186 and other applicable provisions, if any, of the Companies Act, 2013 (the "Act") and the Rules made thereunder, as amended from time to time, consent of the Members be and is hereby accorded to the Board of Directors of the company (hereinafter referred to as the "Board", which term shall be deemed to include any Committee of the Board constituted to exercise its powers, including the powers conferred by this Resolution) to invest an amount upto INR .................... by way of the acquisition by the company, of upto ................Redeemable Preference Shares of face value INR ....../- each, (Preference Shares) to be issued by (other company name); notwithstanding that such investment, together with the aggregate of the investments so far made by the company exceeds the limits laid down under the Act.

FURTHER RESOLVED THAT the Preference Shares shall be redeemed by (other company name) at such rates of premium as may be mutually decided between the company and (other company name).

FURTHER RESOLVED THAT the Board or a Committee thereof be and is hereby authorised to take all such steps as may be necessary, proper and expedient to give effect to this Resolution.”

Explanatory Statement pursuant to section 102 of the Companies Act, 2013

In accordance with the provisions of section 186(2) of the Companies Act, 2013 ("the Act"), no company shall directly or indirectly - give any loan to any person or other body corporate; give any guarantee or provide security in connection with a loan to any other body corporate or person; and acquire by way of subscription, purchase or otherwise, the securities of any other body corporate, exceeding (a) 60% of its paid-up share capital, free reserves and securities premium account or (b) 100% of its free reserves plus securities premium account, whichever is more.

The Board of Directors of your company proposes to make investment of INR .................... by way of acquisition of upto ................ Redeemable Preference Shares of face value INR ...... each to be issued by (other company name), in order to make optimum use of the surplus funds available with the company. This will also be conducive in achievement of some long term strategic and business objectives.

Accordingly, the approval of the members of the company by way of a special resolution as contained in the notice under Section 186 of the Companies Act, 2013 is sought for.

None of the Directors or Key Managerial Personnel of the company and their respective relatives, are in any way, concerned or interested, financially or otherwise, in the Special Resolution set out at Item No. ... of the accompanying Notice.

The Board of Directors commends the Special Resolution set out at Item No. ... for approval of the Members.



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NOTE: The resolution sample(s) here is only for reference, to help you with drafting. Do refer the exact provisions of the Act, relevant rules framed thereunder and any other applicable laws to be able to not to miss out anything important while drafting.