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CS Executive · Setting Up of Business, Industrial and Labour Laws · Corporate Entities - Companies

Himalaya Fruits Producer Company Ltd wishes to invest in another company beyond the 30% limit of its paid-up capital and free reserves. Which course complies with the Companies Act, 2013?

The company must pass a special resolution in its general meeting and obtain prior approval of the Central Government. Without both, investment beyond thirty per cent of paid-up capital and free reserves is not permitted; Board approval or Registrar approval does not suffice.

  1. APass a special resolution in general meeting and obtain prior approval of the Central GovernmentCorrect
  2. BPass an ordinary resolution and file a return with the Registrar after investing
  3. CObtain the approval of the Board alone, since the limit is only advisory
  4. DPass a special resolution and obtain approval of the Registrar of Companies

Explanation

The proviso lets a Producer Company invest above the limit by special resolution passed in general meeting together with prior approval of the Central Government. An ordinary resolution or Board approval is insufficient, and the Registrar is not the approving authority.

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