CMA Final · Corporate and Economic Laws · Company Formation and Conversion
Kaveri Farmers Producer Company, formed under the Companies Act, 2013, has paid-up capital and free reserves of Rs 10 crore. By itself or with its subsidiaries, it may invest in shares of other companies of the kinds covered by section 378ZL(4) up to what amount without further approvals?
The limit is Rs 3 crore. Section 378ZL(4) restricts such investment, by the Producer Company alone or with its subsidiaries, to thirty per cent of paid-up capital plus free reserves, and thirty per cent of Rs 10 crore equals Rs 3 crore.
- ARs 2 crore
- BRs 3 croreCorrect
- CRs 5 crore
- DRs 6 crore
Explanation
Section 378ZL(4) caps such investment at thirty per cent of the aggregate of paid-up capital and free reserves. 30% of Rs 10 crore is Rs 3 crore. Exceeding it needs a special resolution and prior Central Government approval.
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