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shareholders approval

navaaz (na) (36 Points)

07 May 2010

does a private company need shareholders approval for investing in shares of another company ?

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4 Replies

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 07 May 2010

Hello,

Provisions relating to Inter-corporate Investment are governed by section 372A but this section is not applicable to a private company (Unless subsidiary of a public company).

So no need to take shareholders’ approval. However a board resolution is required to be passed before investment.

Regards

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preeti (asst.cs) (34 Points)
Replied 07 May 2010

A . company can subscribe for share of another company only to the limit of 60% of its paid-up share capital and free reserves or 100% of the free reserve whichever is more.Above this limit the company has to pass a special resolution in a general meeting.

RITU BAJAJ (COMPANY SECRETARY) (158 Points)
Replied 07 May 2010

Dear Preeti,

Mr. Ankur Garg is absolutely right, so kindly rectify yourself & read section 372A carefully.

J. Manivannan (Advocate & IP) (242 Points)
Replied 07 May 2010

Dear Navaaz,

Please check with your Articles of Association, which contains any restriction clauses in respect of investment as like members approval requires for that purpose, otherwise no need members approval for Private Limited.