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Board resolution for Trade/Mobilization Advances, Corporate Laws / SEBI / LLP

Issue Id: - 117681
Dated: 7-12-2021
By:- satbir singhwahi
Board resolution for Trade/Mobilization Advances

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An unlisted public company which has given mobilization advances to its contractors for various ongoing projects, which is subsequently deducted from the amounts payable to the contractor.

I would like to mention that there is separate criteria for approving a contractor's request for such advance and deciding the amount to be advanced, where only the upper ceiling limit has been decided upon in the contract. The company is deducts TDS on such payments under Income tax.

Now, the company denies this to be a loan and also states that no separate board resolutions are required for granting such amounts. The company argues that since the project itself has been approved in board meetings, there is no further requirement for board resolutions for granting such advances.

Can this be classified as a loan?

Is the companies' contention to treat this as an adjustable advance is correct, which section mandates passing of a formal board resolution in a meeting?

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