Investment in Layers
A online company registration in india under the Companies Act of 2013 can invest in not more than two layers of investment companies, provided that it must not affect the following for the registered company:
- A Company from acquiring any other company incorporated in a country outside India, in case such other Company has investment subsidiaries beyond two layers as per the laws of such country
- A Subsidiary Company from having any investment subsidiary to meet the requirements under any law or rules and regulations
Registered Company Loan Beneficiaries
No Company can directly or indirectly extend a loan to the following:
- Give a loan to any person or other body corporate
- Give a guarantee or security in connection with a loan to any other body corporate or person
- Acquire by subscription or purchase the securities of any other corporate body exceeding
- sixty percent of its paid-up share capital, free reserves, and securities premium account or
- One hundred percent of its free reserves and securities premium account, whichever is more
Providing a loan, guarantee, security, or acquisition that exceeds the specified limits with prior approval through a special resolution passed at a general meeting must be necessary.
Disclosure in Financial Statement
The registered Company must disclose to the members in the financial statement the full particulars of the following:
- Loans
- Investments
- Guarantees
- Securities
- Purpose for which the beneficiary must utilize the amount
Also Read: Private Limited Company Registration
Consent of the Board
A registered company must not make any investment, loan, guarantee, or security unless the resolution sanctioning it is passed at a board meeting with the directors’ consent. The directors must be present at the meeting. Also, the prior approval of the public financial institution where the term loan is subsisting must be obtained.
But, in some cases, prior approval from a public financial institution is not required. The cases are mentioned in the following points:
- Loans Aggregate
- Investments so far
- Amount for guarantee or security so far provided in all other bodies corporate
- Investments, loans, guarantee, and security proposed provided which does not exceed the specified limit
Also, there must be no default in repayment of loan installments or interest payment per the terms and conditions of such loan to the public financial institution.
Registered Company: Inter-Corporate Loans
Under section 12 of the Securities and Exchange Board of India Act of 1992 and covered under such a class of companies as prescribed, no registered company must take an inter-corporate loan or deposit exceeding the prescribed limit. Also, such a company must furnish the details of the loan or deposits in its financial statement.
Lower Limit on the Interest Rate
The Company must not extend any loan under this section at a rate of interest lower than the prevailing yield of one year, three years, five years, or ten year’s Government Security closest to the tenor of the loan.
Repayment Default
No company which is in default in the repayment of any deposits before or after the commencement of the Act or in payment of interest must give any loan or any guarantee or provide any security or make an acquisition till such default subsists.
Also Read: Unified License(VNO): Preparation and Maintenance of Accounts
Registered Company: Loan Registers
Every registered Company giving a loan or a guarantee or security or making an acquisition must keep a register containing such lending’s particulars. Also, the Company must maintain such registers in a manner as prescribed.