Operation of Bank Account

7/31/2019 Operation of Bank Account

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Opening of a branch office

S. 2(9)-Opening of a branch office-Board Resolution

"RESOLVED that the company's sales depot situated at ________, be and

is hereby declared as a 'branch office' within the meaning of section 2(9)

of the Companies Act, 1956 and not a 'sales depot' and Mr __________ be

authorised to take all such actions as may be necessary for the

establishment of this branch office."

PRACTICE NOTES

1. Meaning of Branch Office.-Section 2(9)(a) defines 'branch office' inrelation to a company to mean (i) any establishment described as a branch

office by the company, or (ii) any establishment carrying on similar or identical

activity in relation to the head office of a company, or (iii) any establishment

engaged in any production, processing or manufacture. It also says that this

does not include any establishment specified in any order made by the Central

Government under section 8.

2. Declaration of an establishment as branch office.-The Board may, by

passing a resolution, describe any establishment other than the registeredoffice or have any establishment which may be prevented by the Central

Government under section 8 from being declared as the branch office not to be

a branch office. Declaring any establishment of a company to be a branch

office can be done by passing a Board Resolution but declaring any

establishment not to be a branch can be done only under the order of the

Central Government under section 8.

3. Advantage of declaring an establishment as branch office.-

Considering the purport of sub-clauses (a), (b) and (c) of clause (9) of section 2,any factory located in any town or village, any establishment carrying on either

the same or substantially the same activity as that carried on by the head

office of the company may be treated as a 'branch office'.


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There is a definite advantage of declaring an establishment not covered by the

definition contained in sub-clauses (b) and (c) of the section to be a branch

office because in the case of a branch office, only summarised quarterly

returns or returns at shorter intervals may be sent to the registered office

pursuant to the provisions of section 209(2) of the Companies Act. Pursuant to

section 228, the audit of the accounts of a branch office need not be done bythe company's Auditor, but may be done by another qualified Auditor

appointed by the company in a General Meeting. If the branch office is situated

outside India, then the accounts of such branch office may be audited either by

the company's Auditor or by the other person appointed in a General Meeting

to be a branch Auditor or by an Accountant duly qualified to act as an Auditor

of the branch office in accordance with the laws of that other country.

4. Exemption from Branch Audit.-Under the provisions of section 228(4) a

company may be entitled to exemption from the audit of a branch office underthe Companies (Branch Audit Exemption) Rules, 1961, either automatically or

by obtaining Central Government's approval by making an application in the

form prescribed under the said Rules.

5. Power of Central Government to declare an establishment not to be

branch office.-To prevent the abuse of the aforesaid provisions, section 8

gives power to the Central Government to declare by order an establishment

not to be a branch office, so that the concessions granted under sections

209(2), 228 or 229 to a 'Branch Office' are not available in every case.

Establishment of a new branch

S. 2(9)-Establishment of a new branch-Board Resolution

WHEREAS the company has been engaged in business of heavy

engineering consisting of a forgeshop and graded steel casting foundry

since July, 2000, and have so far concentrated mainly on the westernregion.

AND WHEREAS the company has now assessed that substantial demand

of the company's products comes mainly from the south and central

region of the country.


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AND WHEREAS there is no sophisticated unit producing such products in

any region which may cater to the needs of the south and central region

of the country.

AND WHEREAS the contemplated region is in close proximity to the

sources of raw materials and cheap labour from the eastern and the

southern regions.

AND WHEREAS the cost of freight on procurement of raw materials and

cost of freight on distribution of the finished products to such south and

central market areas will be most economical, compared to cost of

distribution from the existing manufacturing unit of the company at

Thana.

AND WHEREAS expert technical consultant has completely studied the

technical and feasibility of setting up a new factory at such site as per

the report of such consultant which is hereby tabled and it appears from

such report that the recommendations made therein are quite logical

and economical.

AND WHEREAS the company by making an application under the

Industries (Development and Regulation) Act, 1951, have obtained

necessary licence for the establishment of a factory at _________ (near

Bangalore) with a capacity of 10,000 tones per year.

NOW THEREFORE, IT IS-"RESOLVED that the company may take

immediate action for the establishment of manufacturing unit at

__________ (near Bangalore), and that the project division of the company

be advised to complete all technical and mechanical drawings forthwith

and place orders for the construction and fabrication of the workshop

buildings and equipments for the setting up of the manufacturing

facilities as licensed for a capital outlay of Rs. 320 lakhs and to do all

such things as may be deemed necessary and incidental to the

establishment of a manufacturing unit in the village __________ in the

vicinity of the Bangalore city in the State of Karnataka and for the pur-

pose of setting up the factory, the Managing Director of the company be


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and is hereby authorised and directed to initiate immediately nego-

tiation to buy a suitable plot of land near about the said location, and

submit his recommendation to the Board of Directors for the latter to

consider the suitability of the proposed purchase of land, terms and

conditions of such purchase and the consideration of such plot of land.

RESOLVED FURTHER that the company prefer a land on outright

purchase basis as, lease-hold property will not be suitable, for the

company.

RESOLVED FURTHER that the Managing Director and Mr. PKW a director

of the company be entrusted with the overall responsibility and

authority of implementation and completion of the project preferably

within the amount budgeted therefor, and that Mr. PKW be and is hereby

advised to submit his progress report to the Board of Directors

beginning with negotiation for the purchase of land to the completion of

the setting up of the factory, plant and machinery."

PRACTICE NOTES

1. Place of manufacture treated as Branch Office.-Pursuant to theprovisions of section 2(9)(b), any establishment carrying on either the same or

substantially the same activity as that carried on by the head office of the

company, shall be termed as a branch of the company.

It is construed that under the definition of a branch, as covered by the

aforesaid provisions, a factory or manufacturing facility located in any town or

village, other than the place where the registered office is situated will be

identified as a 'branch office'.

2. Part of Head Office.-If an establishment is not a branch office of the

company, it will form part of the head office and will be dealt with as such for

audit and other purposes [Letter No. 8/16(1)/61-PR, dated 9-5-1961].


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Establishment of company not treated as branch office

S. 2(9) read with S. 8-Establishment of company not treated as branch

office-Board Resolution

"RESOLVED that the sales office of the company situated at 124

Panchkuian Road, New Delhi, which performs the same activity as the

head office of the company situated at 123 Panchukuian Road, New

Delhi be not treated as the branch office of the company and that the

order of the Central Government issued vide letter No . ________ dated

_________ be and is hereby noted."

PRACTICE NOTES

1. Branch Office-meaning.-An office is different from a shop of the company

and a branch office must at least possess the character of an office of the

company. Eastern Distillary Sugar Factory v. Municipal Council, (1933) 3 Corn

Cases 310, 313 Mad.

2. Head office and branch office.-Section 8 empowers the CentralGovernment to declare that an office shall not be treated as a branch office.

The term 'head office', though it may be the registered office, need not

necessarily be so. It is usually the place where the substantial business of the

company is carried and its negotiations conducted.

3. Audit.-An establishment which is not branch office of a company will form

part of the head office for audit purposes. See letter No. 8/16(1)/61-PR, dated

9-5-1961.

4. Application to Central Government.-For making the application to the

Central Government, necessary authorisation should be obtained from the

Board. There is no prescribed form of the said application to be made to the

Central Government and therefore, application should be made on a plain

paper giving full details and adequate justification for the order prayed for


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declaring the branch office not to be treated as a branch office. Application fee

should be accompanied by way of treasury challan or demand draft as required

by Companies (Fees on Applications) Rules, 1999.

5. Limitation.-Central Government will not declare the branch office as part of

the head office if the company itself has already declared it as a branch office.

6. Foreign branch is also a branch office.-Anything done by a company's

branch office outside India cannot be said to be done by foreign concern and

such a branch office is a part and parcel of the company's life and anything

done by it will be deemed to be done by the company itself. Union of India v.

G.A. Randarian Ltd., (1992) 75 Com Cases 486 (Cal).

NOTE: Any resolution approved by unanimous written

consent in lieu of holding a meeting must be signed by

each Director and kept with the Corporations records.

Otherwise, the text ofthe resolution is often included

in the minutes of the meeting atwhich the resolution was

approved:

BOARD OF DIRECTORS RESOLUTIONTO OPEN BANK ACCOUNT

FOR

Upon a motion duly made, seconded, and unanimously carried, it

was adopted that

RESOLVED, that the Treasurer, , be authorized and

directed to open a bank account for the Corporation with , in the City of , which hereby isauthorized to honor

the deposits of the Corporation, and checks drawn against such


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depositssigned by , as long as there funds in

the account.

The undersigned, , certifies that he/she is the

duly elected Secretary of thisCorporation, and that the above isa true and correct copy of the resolution that was duly adoptedat

a meeting of the Board of Directors, which was held in accordance

with State law and theBylaws of the Corporation.

Documents

Operation of Bank Account