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

Anand Securities Pvt Ltd, whose principal business is acquisition of shares, debentures and other securities, wants to buy a large block of shares in Vindhya Cement Ltd, far exceeding the section 186(2) limits. Which is correct under section 186(11) of the Companies Act, 2013?

Only sub-section (1), the two-layer rule, continues to apply. Under section 186(11)(b)(i), investments made by an investment company, meaning one whose principal business is acquiring securities, are outside the rest of section 186, so the limits and special resolution do not bind Anand Securities.

  1. ASection 186 applies fully, including the special resolution
  2. BOnly sub-section (1), on layers of investment companies, applies; the rest of the section does not apply to investments made by an investment companyCorrect
  3. COnly the register requirement under sub-section (9) applies
  4. DOnly the penalty provisions under sub-section (13) apply

Explanation

Section 186(11)(b)(i) provides that nothing in the section, except sub-section (1), applies to any investment made by an investment company, defined as a company whose principal business is acquisition of shares, debentures or other securities. Anand Securities qualifies, so the limits and special resolution do not apply, though the layers rule does.

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