Section 378ZL Investment in other companies, formation of subsidiaries – Companies Act 2013

Section 378ZL of Companies Act 2013 amended by Companies (Amendment) Act 2020. Investment in other companies, formation of subsidiaries.

Amended and updated notes on section 378ZL of the Companies Act 2013 as amended by the Companies (Amendment) Act, 2020 and Company Rules made there under. Detail discussion on provisions and rules related to Investment in other companies, formation of subsidiaries.

Chapter XXIA PART-VII (Section 378ZK to 378ZL) of the Companies Act 2013 (CA 2013) deals with the provisions related to loans to members and investments. Section 378ZL of CA 2013 provides for Investment in other companies, formation of subsidiaries.

Recently, we have discussed in detail section 378ZK (Loan, etc., to Members) of CA 2013. Today, we learn the provisions of section 378ZL of the Companies Act 2013.

In exercise of the powers conferred by sub-section (2) of section 1 of the Companies (Amendment) Act, 2020 (29 of 2020), the Central Government appoints the 11th February, 2021 as the date on which the provisions of section 52 of the Companies (Amendment) Act, 2020 shall come into force.

Accordingly, the provisions of section 378ZL are effective from 11th February, 2021. You may refer Notification No. S.O. 644(E) dated 11-02-2021. In this article, you will learn detail of the provisions of section 378ZL the Companies Act 2013.

Name of ActThe Companies Act 2013
Enacted byParliament of India
Administered byMinistry of Corporate Affairs (MCA)
Number of Chapters29
Number of Sections484 (470-43+57)
Number of Schedules7
You are reading:
Chapter No.XXIA (PART-VII)
Chapter NameLoans to Members and Investments
Section No.378ZL
Section NameInvestment in other companies, formation of subsidiaries, etc.
Monthly Updated EditionCompany Law PDF

Section 378ZL: Investment in other companies, formation of subsidiaries

Section 378ZL(1) of Companies Act

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.

Section 378ZL(2) of Companies Act

Any Producer Company may, for promotion of its objectives acquire the shares of another Producer Company.

Section 378ZL(3) of Companies Act

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.

Section 378ZL(4) of Companies Act

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:

Provided 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.

Section 378ZL(5) of Companies Act

All investments by a Producer Company may be made if such investments are consistent with the objects of the Producer Company.

Section 378ZL(6) of Companies Act

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).

Section 378ZL(7) of Companies Act

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.

Section 378ZL(8) of Companies Act

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.


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