186(1) A company shall unless otherwise prescribed, make investment through not more than two layers of investment companies:

Provided that the provisions of this sub-section shall not affect,—

(i) a company from acquiring any other company incorporated in a country outside India if such other company has investment subsidiaries beyond two layers as per the laws of such country;

(ii) a subsidiary company from having any investment subsidiary for the purposes of meeting the requirements under any law or under any rule or regulation framed under any law for the time being in force.]

186(2) & (3) No company shall directly or indirectly, acquire by way of subscription, purchase or otherwise, the securities of any other body corporate exceeding sixty per cent. of its paid-up share capital, free reserves and securities premium account or one hundred per cent. of its free reserves and securities premium account, whichever is more. (i.e. these are the limits and if these limits are crossed than, SR is required to be passed and while calculating consider the aggregate of the amount already taken/given and proposed to be taken /given).

Section 186 of the Companies Act, 2013

Provided acquisition is made by a holding company, by way of subscription, purchase or otherwise of, the securities of its wholly owned subsidiary company, the requirement of this sub-section shall not apply:  

186(4) Company shall disclose to the members in the financial statement the full particulars of the loans given, investment made or guarantee given or security provided and the purpose for which the loan or guarantee or security is proposed to be utilised by the recipient of the loan or guarantee or security.      

186(5) For doing such, pass BOARD RESOLUTION with the consent of all the directors present at the meeting and the prior approval of the public financial institution concerned where any term loan is subsisting, is obtained. (NOTE : PFI are those PFI as prescribed not all )

Crux : Getting PFI Approval is necessary when limits are crossed and also when  there is a default in repayment of loan instalments or payment of interest thereon as per the terms and conditions of such loan to the public financial institution.

186(8) Also note there is NO DEFAULT in the repayment of any deposits accepted before or after the commencement of this Act or in payment of interest. ( NO DEFAULT IN RESPECT OF DEPOSITS )

186(9) The company is required to maintain a REGISTER in regard to it.

11) Nothing contained in this section, except sub-section (1), shall apply—

(a) to any loan made, any guarantee given or any security provided or any investment made by a banking company, or an insurance company, or a housing finance company in the ordinary course of its business, or a company established with the object of and engaged in the business of financing industrial enterprises, or of providing infrastructural facilities;

(b) to any investment

(i) made by an investment company;

(ii) made in shares allotted in pursuance of clause (a) of sub-section (1) of section 62 or in shares allotted in pursuance of rights issues made by a body corporate;

(iii) made, in respect of investment or lending activities, by a non-banking financial company registered under Chapter III-B of the Reserve Bank of India Act, 1934 and whose principal business is acquisition of securities]

Author Bio

Qualification: CS
Company: N/A
Location: Bhiwani,Haryana, Haryana, India
Member Since: 22 Oct 2021 | Total Posts: 1

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

Join Taxguru Group on Whatsapp

taxguru on whatsapp WHATSAPP GROUP LINK

Join Taxguru Group on Whatsapp

taxguru on whatsapp WHATSAPP GROUP LINK

Join Taxguru Group on Whatsapp

taxguru on whatsapp WHATSAPP GROUP LINK

Join Taxguru Group on Whatsapp

taxguru on whatsapp WHATSAPP GROUP LINK

Join Taxguru Group on Whatsapp

taxguru on whatsapp WHATSAPP GROUP LINK

Join Taxguru Group on Whatsapp

taxguru on whatsapp WHATSAPP GROUP LINK

Join Taxguru Group on Whatsapp

taxguru on whatsapp WHATSAPP GROUP LINK

Join Taxguru Group on Whatsapp

taxguru on whatsapp WHATSAPP GROUP LINK

Join Taxguru Group on Whatsapp

taxguru on whatsapp WHATSAPP GROUP LINK

Join Taxguru Group on Whatsapp

taxguru on whatsapp WHATSAPP GROUP LINK

Join Taxguru Group on Telegram

taxguru on telegram TELEGRAM GROUP LINK

More Under Company Law

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

December 2021
M T W T F S S
 12345
6789101112
13141516171819
20212223242526
2728293031