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Utilisation of allotment money lying idle in bank accounts

CA Sumit Arora (CA)     04 December 2015

CA Sumit Arora
 42 likes  1410 points

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We have a client who is 100% Indian subsidiary of  Foreign Company.

1. The wholly owned Indian subsidiary  has Allotted 50 lac Equity shares of Rs. 10 Each to its Holding Foreign Company and for this purpose the foreign Company  has invested 5cr in lieu of Equity Shares but the Amount of allotment Money which the Indian Company had received from the Foreign Company is  lying ideal as the operations of the Subsidiary Company has not been started yet.

Q- Can company invest the above money in mutual funds or FD or any other purpose till the operations of the company starts?

or it is prohibited ?

Secondly, the Subsidiary Company is engaged in JV in the next month with the Indian Company and will raise the Amount of 8.8 Cr in lieu of Equity Shares.

Q- Can Company use the above amount for investment in mutual funds or for any other purpose?

Kindly provide us with the solution.

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