Procedure for Sale of the Whole or Substantially the Whole of Undertaking of the Company

Aakanksha Singhal

Aakanksha Singhal

Published on: Sep 29, 2020

Khushboo Sharma

Updated on: Sep 30, 2023

★★★★★(20 Rating)

20289

Introduction

Undertaking shall mean an undertaking in which the investment of the Company exceeds twenty percent of its net worth as per the audited balance sheet of the preceding financial year or an undertaking which generates twenty percent of the total income of the company during the previous financial year.

The expression “Substantially the Whole of the Undertaking” in any financial year shall mean twenty percent or more of the value of the undertaking as per the audited balance sheet of the preceding financial year.

Mandatory Requirements

1. Shareholders’ approval shall be required only in case of Sale, Lease or Dispose of the whole or substantially the whole of Undertaking by Public Company except Specified IFSC Public Company.
2. An Unlisted Public Company is mandatorily required to pass a Special Resolution through Postal Ballot if it has more than 200 members but less than 1000 members. [Section 110 read with Rule 22 of the Companies (Management and Administration) Rules, 2014]

Following Procedure is to be followed

• Company shall issue Notice of Board Meeting to all the Directors of Company at their addresses registered with the Company, at least 7 days before the date of Board Meeting. A shorter notice can be issued in case of urgent business.
• Attach Agenda, Notes to Agenda and Draft Resolution with the Notice.
• Hold a meeting of Board of Directors of the Company to consider and approve sale/lease/disposal of an Undertaking.
• Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board Meeting, by Hand/Speed Post/Registered Post/Courier/E-mail to all the Directors for their comments. [Refer the Procedure for Preparation and Signing of Minutes of Board Meeting]

1. Review of Valuation by the Audit Committee Where a Company is required to constitute an Audit Committee under section 177, then the committee shall review the valuation of the Undertaking for the purpose of sale. [For convening meeting of Audit Committee, Refer the Procedure for Conducting Audit Committee Meeting].
2. Convene a Meeting of Board of Directors [As per Section 173 & Secretarial Standard-1 (SS-1)]
   • Issue Notice of Board Meeting to all the Directors of Company at their addresses registered with the Company, at least 7 days before the date of Board Meeting. A shorter notice can be issued in case of urgent business.
   • Attach Agenda, Notes to Agenda and Draft Resolution with the Notice.
   • Hold a meeting of Board of Directors and pass a Board Resolution
     • to consider and approve sale/lease/disposal of an Undertaking subject to shareholders’ approval by way of Special Resolution.
     • to fix the day, date, time and venue of the General Meeting and to approve the draft notice convening the General Meeting or the Postal Ballot along with explanatory statement annexed to the notice as per requirement of the Section 102 of the Companies Act, 2013
     • to authorize the Director or Company Secretary to sign and issue notice of General Meeting or Postal Ballot along with necessary documents.
     • to authorize CS or CFO or any Director of the Company to file requisite form or document with ROC.
   • Listed Company shall submit the disclosure of outcome of Board Meeting to the Stock Exchange as soon as reasonably possible but not later than the following:
     • thirty minutes from the closure of the meeting of the board of directors in which the decision pertaining to the event or information has been taken
     • twelve hours from the occurrence of the event or information, in case the event or information is emanating from within the listed entity
     • twenty four hours from the occurrence of the event or information, in case the event or information is not emanating from within the listed entity, from the conclusion of the Board Meeting and post the same on the website of the Company within 2 working days. [Regulation 30 & 46(3) of the SEBI (LODR) Regulations, 2015]
   • Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board Meeting, by Hand/Speed Post/Registered Post/Courier/E-mail to all the Directors for their comments. [Refer the Procedure for Preparation and Signing of Minutes of Board Meeting]
3. Obtain Shareholders’ Approval
   • By Convening a General Meeting, OR
   • By Passing a Resolution by Postal Ballot. [Refer the Procedure for Passing of a Resolution by Postal Ballot]
   Convene General Meeting [Section 96, 100 and SS-2]
   • Notice of General Meeting shall be given at least clear 21 days before the actual date of a General Meeting in writing, by hand or by ordinary post or by speed post or by registered post or by courier or by facsimile or by e-mail or by any other electronic means or a Shorter Notice can be issued with the consent of at least majority in number and ninety five percent of such part of the paid up share capital of the company giving a right to vote at such a meeting in accordance with Section 101.
   • Notice will be sent to all the Directors, Members, Auditors of Company, Secretarial Auditor, Debenture Trustees and to others who are entitled to receive the notice of the General Meeting.
   • Notice shall specify the day, date, time and full address of the venue of the Meeting and contain a statement on the business to be transacted at the Meeting.
   • Hold the General Meeting on fixed day and pass Special Resolution for sale/lease/disposal of the Undertaking.
   • Listed Companies shall disclose the proceedings of General Meeting to the Stock Exchange within 24 hours from the conclusion of General Meeting and same shall be posted on the website of the company within 2 working days. [Regulation 30 and 46(3) of the SEBI (LODR) Regulations, 2015]
   • Listed Companies shall submit to the stock exchange the details of the voting results within two working days from the conclusion of the meeting and post the same on the website of the Company. [Regulation 44 of the SEBI (LODR) Regulations, 2015]
   • Prepare the minutes of General Meeting, get them signed and compile accordingly. [Refer the Procedure for Preparation and Signing of Minutes of General Meeting].
4. File Form MGT-14 with ROC File Form MGT-14 with the ROC within 30 days of passing Special Resolution in General Meeting along with fee as specified in the Companies (Registration offices and fees) Rules, 2014 and with the following attachments
   • Certified True Copies of the Special Resolution passed along with Explanatory Statement.
   • Copy of the Notice of meeting sent to members along with all the annexure
   • Shorter Notice Consent Letters from the members in case the General Meeting was convened at shorter notice.
   • Copy of Attendance Sheet of General Meeting
   • Any other attachment as may be applicable.