Section 180 Borrowing and Asset-Sale Checklist
Some finance decisions are too material for simple board approval. Section 180 restricts board powers for specified actions and requires company consent by special resolution.
A board can borrow only up to paid-up capital + free reserves + securities premium before it needs a shareholder special resolution specifying the exact borrowing ceiling; the same special-resolution requirement applies to selling, leasing or disposing of the whole or substantially whole undertaking. For a private company, first test the continuing section 462 exemption notification; section 180 does not apply where the private-company exemption applies.
For broader context, see the Companies Act, MCA and Startup Compliance Hub.
What Section 180 covers
India Code Section 180 states that the Board shall exercise specified powers only with the consent of the company by special resolution, including disposal of whole/substantially whole undertaking and specified borrowing powers.
The actual borrowing-limit test
Under Section 180(1)(c), the Board needs a special resolution BEFORE borrowing money that, together with money already borrowed, would exceed the aggregate of the company's paid-up share capital, free reserves and securities premium - temporary loans from the company's own bankers in the ordinary course of business are excluded from this test. For a private company, first test MCA notification G.S.R. 464(E), issued under section 462, which states that section 180 shall not apply to private companies covered by the notification; verify later modifications for the event date. The special resolution itself must specify the total amount up to which the Board may borrow - an open-ended authorisation does not satisfy the section. Consequence of skipping it: debt raised beyond the limit is not valid or binding on the company unless the lender can prove the loan was advanced in good faith without knowledge that the limit had been exceeded - a real risk for the lender, not just a procedural technicality for the company.
Use the Companies Act Related-Party Transaction Approval Checker to work through the related inputs before acting.
Transaction controls
| Transaction | Control |
|---|---|
| Borrowing beyond limits | Check paid-up capital, free reserves and securities premium where relevant. |
| Sale/lease/disposal of undertaking | Evaluate whether whole/substantially whole threshold is triggered. |
| Lender condition precedent | Provide certified shareholder resolution where required. |
| MGT-14 implication | Track special resolution filing under Section 117. |
Evidence folder
- Board note explaining transaction.
- Special resolution and explanatory statement.
- Debt/asset sale agreements.
- MGT-14 SRN and challan.
- Updated borrowing register/covenant tracker.
For the connected rule, example or next step, see Beneficial Interest in Shares Under Section 89: Declaration Checklist.
Finin2min warning
Official sources used
This article is intentionally source-limited to official MCA / India Code material. Verify final filing positions with the latest Act, Rules, MCA forms and portal advisories before publishing.
- India Code: Section 180 — Restrictions on powers of Board
- India Code: Section 117 — Resolutions and agreements to be filed
- India Code: Companies Act, 2013 official PDF
FAQs
Section 180 contains restrictions on powers of Board.
Yes. Section 180 requires company consent by special resolution for specified powers.
Special resolutions are generally tracked for Section 117 filing review.
Source and review trail
Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.
- Primary category
- Companies Act & MCA
- Official starting point
- www.mca.gov.in
See “Official sources used” above for the India Code Section 180/117 and Companies Act PDF references used in this article.
Primary sources & related provisions
Statutory provisions referenced in this guide:
Applicability and computation control
Borrowing-limit workflow
- Determine whether section 180 applies to the company for the event date.
- Compute paid-up share capital, free reserves and securities premium from the current approved records.
- Reconcile existing borrowings and separately identify qualifying temporary loans from the company's bankers.
- Compare the proposed borrowing and existing amount with the statutory base and the ceiling in any existing special resolution.
- Complete board, shareholder and section 117 filing steps where required, then retain lender and utilisation evidence.
Worked example
A public company has paid-up capital of Rs 10 crore, free reserves of Rs 40 crore and securities premium of Rs 5 crore. Existing counted borrowing is Rs 48 crore and a proposed term loan is Rs 15 crore. The resulting Rs 63 crore exceeds the Rs 55 crore base, so the company should establish an adequate special-resolution ceiling before the borrowing, subject to the exact facts and exclusions.
Exam and advisory case
A lender receives a board resolution from a private company and asks for a section 180 special resolution as a standard condition. The legal file should first test the private-company exemption; the parties may retain a contractual shareholder condition, but it should not be described as a statutory section 180 requirement if the exemption applies.