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SEC 372 A

kishor kumar g.c (C A Final Student) (142 Points)

27 February 2008

Hi All

A Ltd company acquires 1 st time entire ( 100% ) shares in B Ltd. Sec 372 A is applies

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2 Replies

Kaustuv (Practicing CA) (1773 Points)
Replied 01 March 2008

it will depend on the paid up capital and free reserve position of A Ltd. , after this, as B Ltd. becomes wholly owned subsidiary of A ltd. so the loan/investments by A to B Ltd. will fall outside Sec. 372A

Ruchika Gupta (Chartered Accountant) (247 Points)
Replied 04 March 2008

Yes, in this case Sec 372A will apply. Company has to obtain a uninamious approval at the board meeting and get the intercorporate investment approved at the first general meeting held after such appointment. However if aggregate of intercorporate loan,investment, guarantee and security and proposed investment is greater than higher of :-
1) 60%(Paid up capital + free reserves) or
2) 100% of free reserves
Then approval at general meeting has to be obtained by passing a Special Resolution.
It must be seen that company has not defaulted in repayment of any of its public deposits, otherwise it will first have to make that default good and then make such investment.
In future, for calculating aforesaid ceiling of investments, this particular investment will be ignored b'oz it will become 100% subsidiary of company.