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CMA Final · Corporate and Economic Laws · Investment and Loans

Under Section 186 of the Companies Act, 2013, the restriction on layers of investment companies applies to a company that wishes to make investment through investment companies. For this purpose, an 'investment company' means a company whose:

An investment company under Section 186 is a company whose principal business is the acquisition of shares, debentures or other securities. Its status depends on the nature of its principal business, not on who owns it, where it is located, or whether it lends to group companies.

  1. Aprincipal business is the acquisition of shares, debentures or other securitiesCorrect
  2. Bpaid-up share capital is wholly held by a holding company
  3. Cregistered office is situated outside India
  4. Dprincipal business is giving loans to its group companies

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, ownership pattern or location of the office does not determine the status.

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