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Share capital of pvt co can be invested in deposits

venu (STudent) (75 Points)

17 March 2012

My Company has been registerd as private limited company with minimum of Rs 100,000/- but after two years also the company didn't do any business and has incurred preliminary expenses of about Rs 25000/- from that Rs 100000

And now that my query is As the money Kept in the Company's bank Account is idle , therefor want to invest some amount in Bank Deposits so that it can earn some interest

Can We do that?

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8 Replies

Charu Srivastava (Company Secretary) (4210 Points)
Replied 17 March 2012

There is no restriction in thiss regard provided the Article authorise the Company to invest.

Other views are solicited.

venu (STudent) (75 Points)
Replied 17 March 2012

Thanks for the info

I mean that as we are using the money from Share capital of the Company. Can We do that

As of now Company Cash balance is around Rs 72000/-

And i want to invest in Oriental Bank Deposits for Rs 50000/-

Is it amount to reduction of Share capital ?

Please help Me

Jagdish Patel (Article Assiatant) (24 Points)
Replied 17 March 2012

No, It doesn't mean reduction in Share capital. Its just Utilisation of share capital.

Charu Srivastava (Company Secretary) (4210 Points)
Replied 17 March 2012

Thre Share Capital is can be used in the interest of the Company. and investment doesnt amount to reduction of Capital.

P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad) (8229 Points)
Replied 18 March 2012

Yes, you can very well do that. Pl go ahead...

Praveen Kumar Agarwal (Accountant) (180 Points)
Replied 19 March 2012

When u invested capital in ur company then u must have passed an entry i.e. Cash/bank a/c debit to capital a/c.(rs. 1,00,000).. Nw when u r investing any money then u will pass an entry i.e. Investment a/c debit to cash or bank a/c(rs. 50,000). Now tell me how ur capital is going to be reduced? u r not going to use capital of ur company rather u r using the fund of ur company... I think its clear now.

CS Aditya Agrawal (PCS) (110 Points)
Replied 19 March 2012

Agreed with all views, moreever you may go through the section 100 of the Companies Act to know the meaning/circumstances of/comes under Reduction of Share Capital.

Regards

Mihir Doshi (B.Com, CA, CS, LLB) (2187 Points)
Replied 19 March 2012

Agree with all experts.

Simple question is without Share capital money, how would you invest money into FD, even if you want to do business then also you need to utilise the money out of your bank account where you have already deposited your Share capital money.

Just within the boundary of AOA and MOA, you can utilise that money.

Thanks

Mihir Doshi