Subscribe to CCI PRO and support your CAclubindia community. Click Here!

What is the status of captive power plant SPV in the books of investor / Consumer

Gargi Ranade (Company Secretary ) (2 Points)

11 June 2025

Company A has invested in Captive power plant i.e. company B , and invested upto 49% of share capital in Co. B , however company does not have any rights to appoint /choose directors and KMP , Company also does not have any operational rights . after completion of lockin period company is entitled to get back the investement value at face value in such case will Company B is considered as Associate company of Company A as per Companies Act

Reply
Follow
Share

1 Replies

Rama chary Rachakonda (Master in Accounts & high court Advocate email ID:ramachary64@gmail.com voice no:9989324294) (8132 Points)
Replied 12 June 2025

To determine if Company B is an associate company of Company A, let's analyze the situation based on the Companies Act, 2013.

Definition of Associate Company As per Section 2(6) of the Companies Act, 2013, an "associate company" means a company in which another company has a significant influence, but which is not a subsidiary company of the company having such influence.

Significant Influence Significant influence is the power to participate in the financial and operating policy decisions of the investee company, but it's not control or joint control over those policies.

Analysis In your scenario: -

Company A has invested up to 49% of the share capital in Company B. - Company A doesn't have any rights to appoint or choose directors and KMP. -

Company A doesn't have any operational rights. - Company A is entitled to get back the investment value at face value after the lock-in period.

Conclusion Based on the given information, it seems unlikely that Company B would be considered an associate company of Company A.

Here's why: - Company A lacks significant influence over Company B's financial and operating policies, as it doesn't have the power to appoint directors or participate in operational decisions. -

The entitlement to get back the investment value at face value after the lock-in period might suggest a more investor-like relationship rather than a significant influence.

However, a detailed analysis of the agreement and the specific circumstances would be necessary to make a definitive determination.