company law query

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25 March 2011 Can a company invest its paid up capital and free reserves into another company

Aditya Maheshwari

Aditya Maheshwari (Expert)
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25 March 2011 Private limited company can invest any amount after passing necessary resolution by the board.

For public company the limit is 60% of paid up capital + free reserves or 100% of free reserves whichever is higher.

If more investments needs to be made then autorisation from shareholder required as mentioned in section 372A.

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Jayashree S Iyer

Jayashree S Iyer (Expert)
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26 March 2011 I believe the company is into some business activity. If it is only engaged in investment activity, then it may become an investment company attracting NBFC regulations.

Guest

Guest (Querist)

27 March 2011 my question was not that how much a company can invest in another company,but my question was, can a company use its paid up capital and free reserves to invest it into another company?

Jayashree S Iyer

Jayashree S Iyer (Expert)
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28 March 2011 Yes, it can, but only subject to the limits specified in Section 372A. Again if the activity is only investment, it will attract NBFC provisions.

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