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

Mahila Dairy Producer Company Ltd wants to form a subsidiary company to promote its objects, and also to enter a joint venture with a body corporate. What approval does the Companies Act, 2013 require for this?

A special resolution is required. The Producer Company may form a subsidiary, enter a joint venture or subscribe to the share capital of a body corporate to promote its objects, but this must be authorised by a special resolution of members, not merely by the Board.

  1. AA special resolutionCorrect
  2. BOnly a Board resolution passed by simple majority
  3. CAn ordinary resolution of members
  4. DPrior approval of the Central Government in every case

Explanation

A Producer Company may subscribe to share capital of, or enter an agreement or arrangement such as a subsidiary or joint venture with, a body corporate to promote its objects by special resolution. Central Government approval is needed only to invest beyond the prescribed limit, not for the subsidiary or joint venture itself.

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