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

Kisan Agro Producer Company Ltd has accumulated general reserves of its own. Under the Companies Act, 2013, how may these general reserves be invested?

A Producer Company must invest its general reserves to secure the highest returns from approved securities, fixed deposits, units, or bonds issued by the Government, a co-operative or a scheduled bank, or in any other prescribed mode. It is not limited to listed equity.

  1. AOnly in equity shares of listed companies chosen by the Board
  2. BTo secure the highest returns available from approved securities, fixed deposits, units, or bonds issued by the Government, a co-operative or a scheduled bank, or in another prescribed modeCorrect
  3. COnly by distributing them to members as bonus shares
  4. DOnly in fixed deposits of the promoter directors' private firms

Explanation

The Act directs that general reserves of a Producer Company be invested to secure the highest returns from approved securities, fixed deposits, units, or bonds issued by the Government, co-operative or scheduled bank, or in any other prescribed mode. Investment only in listed equity is not the rule, and the other options have no basis in the provision.

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