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CS Professional · Corporate Restructuring, Valuation and Insolvency · Acquisition of Company or Business

After acquiring a target, Sagar Holdings Ltd, a non-banking company, wants to restructure its group by holding the target through a chain of investment companies. Under Section 186(1), unless otherwise prescribed, how many layers of investment companies may it use?

Not more than two layers. Section 186(1) restricts a company, unless otherwise prescribed, to making investments through at most two layers of investment companies, with limited exceptions such as acquiring a foreign company whose structure has deeper layers. A special resolution cannot extend the number of layers.

  1. ANot more than two layersCorrect
  2. BNot more than three layers
  3. CNot more than one layer
  4. DNo limit, provided a special resolution is passed

Explanation

Section 186(1) says a company shall, unless otherwise prescribed, make investment through not more than two layers of investment companies. Exceptions cover acquiring a foreign company with deeper layers under its local law, and a subsidiary having an investment subsidiary to meet legal requirements. A special resolution does not lift the layer cap.

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