Company not to be made inter corporate Investment through not more than two layers of investment companies.
Limits for the Investment, Guarantee and Loan
The Company shall make 60% of Paid-up Capital +Free Reserve + Security Premium or 100% of free reserve +Security Premium (Whichever is more).But the Company may give loan, guarantee or provide any security acquisition beyond the limit with the prior approval of Share holders in General Meeting.
It is mandatory to take prior approval From Financial institutions, Banks from which Company takes loan and made any defaults against repayment of loan amount or interest.
The Company shall maintain a Register for recording these transactions
Exemption of the provision
1. A Company acquires any Company which incorporated outside India. Such Company has Investment subsidiary beyond two layers as per the law of the host country.
2. A subsidiary Company from having any investment subsidiary for the purpose of meeting of the requirement under any law for the time being in force
Non applicability for certain Companies
1. Banking Company, Insurance Company, Housing Finance Company etc.
2. Any Company whose main business is acquisition of shares or any other securities
Penalty for Company
If the Company contravenes the provision, the Company shall be penalized with fine which shall not be less than Rs.25000/- but which may extend to Rs.5 lacs
Penalty for Officers
Every officer of the Company who is default shall be punishable with imprisonment for a term which may extended to two years and fine which shall not be less than Rs.25000/- but which may extended to Rs.1 lacs.