Green Pvt Ltd is a wholly owned subsidiary of Century-men Ltd. Green Pvt Ltd invests in the Securities of Century-men Ltd. amounting ₹80 Lakhs. The Balance sheet extract of Green Pvt Ltd: LIABILITIES ₹ ASSETS ₹ Paid up S

Green Pvt. Ltd. is the wholly owned subsidiary of Century-men Ltd. and as per Section 19 of the Companies Act, 2013, a subsidiary company is not allowed to invest in the shares of its holding company, except in certain specified cases. Accordingly, Green Pvt. Ltd., while investing into the securities of Century-men Ltd. shall ensure to comply with the following conditions: The Investments shall not be into the shares of Century-men Ltd except where Green Pvt. Ltd. will be holding those shares either as a legal representative of a deceased member of Century-men Ltd. or as a Trustee. The Investment into Securities (Other than Shares) of Century-men Ltd shall be in compliance of sub-sections (2) & (3) of Sec 186 of the Companies act, 2013, as detailed hereinafter: Section 186(2) of the Companies Act, 2013, stipulates that no company shall directly or indirectly: (a) give any loan to any person or other body corporate; (b) give any guarantee or provide security in connection with a loan to any other body corporate or person; and (c) acquire by way of subscription, purchase or otherwise, the securities of any other body corporate, exceeding 60% of its paid-up share capital, free reserves and securities premium account or 100% of its free reserves and securities premium account, whichever is more. Further, where the aggregate of the loans and investment so far made, the amount for which guarantee or security so far provided to or in all other bodies corporate along with the investment, loan, guarantee or security proposed to be made or given by the Board, exceed the limits specified under Section 186(2) of the Companies Act, 2013, no investment or loan shall be made or guarantee shall be given or security shall be provided unless previously authorised by a special resolution passed in a general meeting. So, in the given case, Green Pvt. Ltd., the wholly owned subsidiary company wants to invest in the holding company (Century-men Ltd), amounting to ₹80 lacs, wherein: Liabilities Paid-Up Share Capital= ₹100 Lakhs Securities Premium = ₹20 Lakhs Reserve & Surplus= ₹10 Lakhs Assets Fixed Assets= ₹130 Lakhs Thus, as per Section 186(2) of the Companies Act, 2013 (a) 60% of ₹130 Lakhs = ₹78 Lacs (b) 100% of ₹30 = ₹30 Lacs Higher amount is ₹78 Lacs Therefore, as amount proposed to be invested is ₹80 Lakhs which is exceeding the stipulated amount of ₹78 Lacs. Hence, prior approval by Special Resolution at General Meeting is required to be taken in terms of Sec 186(3) of the Companies Act, 2013. Further, in terms of 2nd Proviso to Sec 186(3), the company is required to disclose to the members in the financial statement the full particulars of the investment made.