Decide before treasury places the money
Where section 180 applies, the Board needs the company's consent by special resolution to invest compensation received as a result of a merger or amalgamation otherwise than in trust securities. Section 180(1)(b) contains no monetary threshold. This guide assumes a public company to which the provision applies. Check company classification before extending the analysis. The private-company exemption from section 180 is subject to the applicable section 462 notifications, including the condition concerning defaults in filing financial statements or annual returns.
Read the applicable text: MCA: Companies Act, 2013, sections 117, 180 and 186.
Prove the source and classify the destination
Use the sanctioned scheme, order, settlement terms and receipt evidence to identify amounts received by the company as compensation. Separate other scheme-related flows or working-capital receipts; the fact that an amount arrives at closing is not conclusive. Obtain a documented legal classification of each proposed instrument as a trust security or otherwise. Do not equate an internal low-risk rating, a market label or a permitted treasury product with the statutory category.
Track partial receipts and mixed cash
Tag receipts to the operative scheme and maintain an unallocated balance. Before a placement, identify the part attributable to compensation and assess whether the proposed investment falls outside trust securities. A separate bank account is a useful control where practical; internal allocations for commingled cash should be contemporaneous and supported rather than reconstructed after placement.
Keep approval and authority distinct
Match the proposed action to the special resolution where needed, including any terms, scope, limit or period actually approved. Use those express limits as operational controls rather than assuming the Act sets a rupee cap under this clause. Confirm Board and other applicable investment approvals separately, including section 186 where relevant. Record the special resolution and file it with the Registrar under section 117 in the prescribed manner within 30 days of passing it. If facts or instrument type change, recheck the mandate before execution.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Mixed receipt
An ₹80 lakh credit includes ₹55 lakh identified as merger compensation and ₹25 lakh of separate settlement proceeds on the supported facts. The section 180(1)(b) trace begins with ₹55 lakh.
Illustrative example 2: Two investment classes
Of ₹90 lakh compensation, ₹35 lakh goes into instruments legally confirmed as trust securities and ₹55 lakh into other instruments. The latter ₹55 lakh is the proposed placement requiring consent under this clause.
Illustrative example 3: No numerical safe harbour
Treasury proposes investing ₹1 lakh of a ₹50 lakh compensation balance outside trust securities. The proposed amount is 2% of the balance, but the clause still applies.
Illustrative example 4: Two receipts and a placement
The company receives compensation instalments of ₹40 lakh and ₹30 lakh. It places ₹28 lakh into confirmed trust securities. The tracked unallocated cash is ₹42 lakh.
Illustrative example 5: Mandate headroom
A special resolution expressly authorises placements up to ₹65 lakh on its own stated terms. ₹48 lakh is already counted against it, leaving ₹17 lakh. A proposed ₹21 lakh exceeds the stated mandate by ₹4 lakh.
Illustrative example 6: Mixed bank balance
A ₹100 lakh account includes a supported ₹60 lakh compensation balance. A ₹75 lakh placement uses ₹40 lakh of other funds and ₹35 lakh of compensation. ₹25 lakh of the compensation cash remains. Test the ₹35 lakh against the proposed instrument and approval.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Confirm company type and section applicability | Corporate records and exemption review |
| 2 | Read the operative scheme and order | Scheme and sanction documents |
| 3 | Identify the compensation recipient and basis | Payment or settlement provisions |
| 4 | Separate receipts by legal character | Receipt breakdown and bank advice |
| 5 | Track the unallocated compensation balance | Source ledger and placement history |
| 6 | Classify each proposed investment | Instrument terms and legal analysis |
| 7 | Identify the applicable consent before placement | Approved special resolution where required |
| 8 | Check the scope of authority and express limits | Mandate and headroom working |
| 9 | Review separate investment controls | Board authority and section 186 assessment as applicable |
| 10 | Archive each placement with its source and approval | Execution confirmation and audit trail |
Sixteen practitioner FAQs
1. Does the clause cover all receipts on a merger date?
Test whether the company received the amount as compensation resulting from the merger or amalgamation.
2. Who must receive the amount?
The clause concerns compensation received by the company. Payments made directly to another person require separate analysis.
3. Is there a small-value exception in the clause?
The text specifies no rupee threshold.
4. Does a conservative risk rating prove a trust security?
No. Establish the legal classification of the instrument.
5. Does the clause require all compensation to be invested?
It restricts the Board’s power to invest it otherwise than in trust securities.
6. Is a resolution approving the scheme automatically enough?
Check the actual wording for consent to the investment contemplated under this clause.
7. Can an investment committee override the need for member consent?
Internal delegation does not supply required special-resolution consent.
8. Can normal treasury limits substitute for the resolution?
No. They operate alongside the required company approval.
9. What if part of the proposal qualifies as trust securities?
Split by instrument and trace the compensation funding of each component.
10. Does the Act prescribe a separate bank account here?
The clause itself does not specify one; separation can support the trace.
11. Does each payment instalment have a separate source record?
Maintain individual receipt records and reconcile them to the scheme and the consolidated balance.
12. What if the proposed instrument changes after approval?
Check whether its new class and terms remain within the approved scope.
13. Can available authority be inferred from a percentage of net worth?
No. The borrowing and disposal tests elsewhere in section 180 do not define this clause.
14. Can approval under this clause replace a section 186 review?
Review applicable powers and requirements independently.
15. What if funds have already been placed without review?
Preserve the timeline and escalate for legal analysis of the actual facts and available remedies.
16. How should the company record its conclusion?
Keep a dated file covering source, instrument classification, member consent where needed, and execution.
Official sources
MCA: Companies Act, 2013, sections 117, 180 and 186
MCA G.S.R. 464(E), 5 June 2015: private-company exemptions
G.S.R. 583(E), 13 June 2017: filing-default condition (Gazette text)