Section 378ZL: Investment in other companies, formation of subsidiaries etc
This section regulates how a Producer Company can invest its funds, form subsidiaries, and acquire shares in other companies.
The section, clause by clause
What the section says
In plain terms
(1)The general reserves of any Producer Company shall be invested to secure the highest returns available from approved securities, fixed deposits, units, bonds issued by the Government or co-operative or scheduled bank or in such other mode as may be prescribed.
A Producer Company's general reserves must be invested to get the highest returns from approved securities, fixed deposits, units, bonds issued by the Government or co-operative or scheduled bank, or in other prescribed modes.
(2)Any Producer Company may, for promotion of its objectives acquire the shares of another Producer Company.
A Producer Company can acquire shares of another Producer Company to promote its objectives.
(3)Any Producer Company may subscribe to the share capital of, or enter into any agreement or other arrangement, whether by way of formation of its subsidiary company, joint venture or in any other manner with any body corporate, for the purpose of promoting the objects of the Producer Company by special resolution in this behalf.
A Producer Company can subscribe to the share capital of, or enter into agreements with, another body corporate to promote its objects, by special resolution.
(4)Any Producer Company, either by itself or together with its subsidiaries, may invest, by way of subscription, purchase or otherwise, shares in any other company, other than a Producer Company, specified under sub-section (2), or subscription of capital under sub-section (3), for an amount not exceeding thirty per cent. of the aggregate of its paid-up capital and free reserves:
A Producer Company can invest in shares of another company, up to 30% of its paid-up capital and free reserves, or more with special resolution and Central Government approval.
provisoProvided that a Producer Company may, by special resolution passed in its general meeting and with prior approval of the Central Government, invest in excess of the limits specified in this section.
(5)All investments by a Producer Company may be made if such investments are consistent with the objects of the Producer Company.
Investments by a Producer Company must be consistent with its objects.
(6)The Board of a Producer Company may, with the previous approval of Members by a special resolution, dispose of any of its investments referred to in sub-sections (3) and (4).
The Board of a Producer Company can dispose of investments with prior approval of Members by special resolution.
(7)Every Producer Company shall maintain a register containing particulars of all the investments, showing the names of the companies in which shares have been acquired, number and value of shares; the date of acquisition; and the manner and price at which any of the shares have been subsequently disposed of.
Every Producer Company must maintain a register of its investments, including details of shares acquired and disposed of.
(8)The register referred to in sub-section (7) shall be kept at the registered office of the Producer Company and the same shall be open to inspection by any Member who may take extracts therefrom.
The register of investments must be kept at the registered office and be open to inspection by any Member.
(8)PART VIII PENALTIES
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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.