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Cross Holding of Shares

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(Querist)
23 March 2011 Company-A invested in the Preference Share of Company-B and in turn Company-B wants to invest in Preference Shares of Company A, whether this cross holding of Shares in two Companies is OK.

For your clarification both the companies are Unlisted Public Companies.
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Rasesh

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Rasesh (Expert)
23 March 2011 A Company is not allowed to invest in its own shares unless by a manner which leads to cancellation / reduction of capital. This cross-holding, if proved, would lead to cancellation of shares issued by both the companies. Please refer Sec 77.
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