Borrowing is an external source of raising money. A company cannot borrow money until it is so authorised by its memorandum. Under Section 179 of the Companies Act, 2013, the directors have the power to pass a resolution to borrow money and the power to borrow money can be delegated only by passing a resolution. Under Section 180 of the Act, the directors are restricted from borrowing temporary loans that are obtained from the company’s banker. This section also defines temporary loans as the loans which are repayable on demand within 6 months from the date.
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