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CMA Final · Corporate and Economic Laws · Investment and Loans

Section 186(1) of the Companies Act, 2013 restricts the number of layers of investment companies through which a company may make investments. For this purpose, an "investment company" is a company whose principal business is:

An investment company, for Section 186, is a company whose principal business is the acquisition of shares, debentures or other securities. Principal business of lending, manufacturing or providing infrastructure does not make a company an investment company under the statutory explanation.

  1. AThe acquisition of shares, debentures or other securitiesCorrect
  2. BThe giving of loans to its group companies
  3. CThe manufacture of goods for export markets
  4. DThe provision of infrastructure facilities listed in Schedule VI

Explanation

The Explanation to Section 186 defines an investment company as one whose principal business is the acquisition of shares, debentures or other securities. Lending to group companies or providing infrastructure facilities is not the defining test. Schedule VI relates only to the meaning of infrastructure facilities.

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