Skip to content

CMA Final · Corporate and Economic Laws · Investment and Loans

Kaveri Ltd proposes to acquire Nordic AB, incorporated outside India, which has investment subsidiaries across four layers as permitted by its home country law. Kaveri has no other investment subsidiaries. Which is correct under Section 186(1)?

The acquisition is not hit by the layer limit. The first proviso to Section 186(1) says the restriction does not affect acquiring a company incorporated outside India that has investment subsidiaries beyond two layers under that country's laws. No reduction of layers or lender approval is needed for this reason.

  1. AThe proviso to sub-section (1) means the layer limit does not affect the acquisition of such a foreign companyCorrect
  2. BThe acquisition is barred because the foreign company has more than two layers
  3. CThe acquisition requires the foreign company to first reduce its layers to two
  4. DThe acquisition is allowed only with prior approval of a public financial institution

Explanation

Proviso (i) states that the layer restriction does not affect a company acquiring a foreign-incorporated company whose investment subsidiaries exceed two layers as per that country's laws. The public financial institution approval in sub-section (5) relates to term loans and does not concern layers.

Did you get it right without looking?

One question tells you little. A timed set on Investment and Loans shows your real accuracy, how long you take and where you lose marks.

Practise Investment and LoansFree diagnostic mock

More Investment and Loans questions