IF Limited (”the subsidiary”) is a wholly owned subsidiary of IIP Ltd. (“the holding company”), a Company, registered under the Companies Act. The subsidiary is also registered as a Non Banking Financial Company under the RBI Act. And thus a finance company within the meaning of Sec 372A(8) of the companies Act.
Besides investments in the subsidiary company, the holding company has also made investment is shares of other bodies corporate as per List 1 given below:
List 1:
CO1 LTD ((not a subsidiary)
CO2 LTD ((not a subsidiary)
CO3 LTD (another wholly owned subsidiary)
The subsidiary company has also made investment is shares of other bodies corporate as per List 2 given below:
List 2:
CO4 Ltd ((not a subsidiary)
CO5 Ltd ((not a subsidiary)
Now the holding company, IIP Limited, proposes to make invest in shares of another company, New Co Ltd This investment will not make the new company New Co Ltd. a subsidiary.
Query:
At the time when IIP Ltd proposes to invest in the shares of New Co Ltd, for determining the limit u/s 372A of the companies Act, whether the investment made by IIP Ltd in other bodies corporate as per list 1 alone need to be considered (excluding its subsidiaries) or IIP Ltd’s investment as well as investments made by its subsidiary IF ltd in other bodies corporate both need to clubbed together?
The reason for the query is due to the fact that Sec 372A starts with “No company shall directly or indirectly…..”
Whether the investment in other bodies corporate by the subsidiary, IF Ltd, would amount to indirect investment by the holding company, IIP Ltd?
Seniors / experts may please share their views. Elaborate reply eith proper reasoning expected.
Thanks and regards
Sujit Talukder
CAclubindia
