Can a private limited company invest/trade in stock market?

9971 views 3 replies

13aya

Business

29 Points Joined June 2015

Hi,

I've registered a Private Limited company one year back. Basically it's registered as an IT company. But it's idle ever since it's registered as one of my co-founder is out of town. So, I do not plan to do any operations under it. But I want to know whether it's possible to add more capital to it and invest/trade on the stock market? If I'm right then there are some restrictions for finance related companies. Can a private limited company invest or trade stocks, derivatives, currency, etc. if it's not registered as an NBFC?

Thanks!

Replies (3)

suresh

proprietor

425 Points Joined May 2011

Regardlessless registered with RBI as NBFC or an Investment company, no company can indulge in trading of stocks or derivatives. However, every company is free and well within its right to invest it's funds in securties markets.

suresh

proprietor

425 Points Joined May 2011

For a company to be considered as NBFC, it has to pass the 50–50 test.

For NBFC

1.Financial assets should constitute more than 50 per cent of the total assets and
2.Income from financial assets constitute more than 50 per cent of the gross income.
If the company falls under this test then it will be considered as an NBFC and it has to get itself registered with RBI. Till it is registered, it cannot do trading of stocks and derivatives.

Dinesh Tiwari

2 Points Joined January 2026

Just asking for clarification : As per RBI 50:50 rules and 10 cr NOF is required to apply for registration. So why cant someone trade in with own fund by incorporating a private limited company. Also if no assets are owned for example all trades are short term and never held for long term also as on 31st march if all the short term trades are squared off irespctive of their holding period or holding is shown as stock in trade rather than investments so it will not qualify for registration. So in this case what do you suggest.