Section 187: Investments of company to be held in its own name
This section requires companies to hold investments in their own name, with some exceptions for holding shares in subsidiary companies, depositing with bankers, or holding in a depository.
Penalty
(4) If a company is in default in complying with the provisions of this section, the company shall be liable to a penalty of five lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.]
The section, clause by clause
What the section says
In plain terms
(1)All investments made or held by a company in any property, security or other asset shall be made and held by it in its own name:
A company must make and hold investments in its own name, except when it needs to hold shares in a subsidiary company in a nominee's name to meet the minimum member requirement.
provisoProvided that the company may hold any shares in its subsidiary company in the name of any nominee or nominees of the company, if it is necessary to do so, to ensure that the number of members of the subsidiary company is not reduced below the statutory limit.
(2)Nothing in this section shall be deemed to prevent a company— (a) from depositing with a bank, being the bankers of the company, any shares or securities for the collection of any dividend or interest payable thereon; or
A company can deposit shares or securities with its bankers for collection of dividend or interest, or with the State Bank of India or a scheduled bank to facilitate transfer, and must re-transfer them to its own name if no transfer occurs within 6 months.
(2)(b)from depositing with, or transferring to, or holding in the name of, the State Bank of India or a scheduled bank, being the bankers of the company, shares or securities, in order to facilitate the transfer thereof:
provisoProvided that if within a period of six months from the date on which the shares or securities are transferred by the company to, or are first held by the company in the name of, the State Bank of India or a scheduled bank as aforesaid, no transfer of such shares or securities takes place, the company shall, as soon as practicable after the expiry of that period, have the shares or securities re-transferred to it from the State Bank of India or the scheduled bank or, as the case may be, again hold the shares or securities in its own name; or
(2)(c)from depositing with, or transferring to, any person any shares or securities, by way of security for the repayment of any loan advanced to the company or the performance of any obligation undertaken by it;
(2)(d)from holding investments in the name of a depository when such investments are in the form of securities held by the company as a beneficial owner.
(3)Where in pursuance of clause (d) of sub-section (2), any shares or securities in which investments have been made by a company are not held by it in its own name, the company shall maintain a register which shall contain such particulars as may be prescribed and such register shall be open to inspection by any member or debenture-holder of the company without any charge during business hours subject to such reasonable restrictions as the company may by its articles or in general meeting impose.
If a company holds investments in a depository as a beneficial owner, it must maintain a register with prescribed particulars, open to inspection by members or debenture-holders during business hours.
(4)If a company is in default in complying with the provisions of this section, the company shall be liable to a penalty of five lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.]
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Amendment notes
- 1. Subs. by Act 1 of 2018, s. 62, for sub-section (11) (w.e.f. 7-5-2018).
- 2. Ins. by Act 1 of 2018, s. 62 (w.e.f. 7-5-2018).
- 1. Subs. by Act 29 of 2020, s. 38, for sub-section (4) (w.e.f. 21-12-2020).
- 2. Subs. by Act 21 of 2015, s. 16, for “special resolution” (w.e.f. 29-5-2015).
- 3. The proviso ins. by Act 1 of 2018, s. 63 (w.e.f. 9-2-2018).
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Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.