SECTION 372(4) INVESTMENT IN OTHER BODIES CORPORATE

1. Subject - Investment in other bodies corporate.

2. Passing Authority - General Meeting.

3. Nature of the Resolution - Ordinary Resolution.

4. Specimen Resolution(s):

A. WHERE THE INVESTMENT IS IN A PROPOSED COMPANY.

"That subject to the approval of the Central Government, the Board of Directors of the Company be and are hereby authorised to make an investment of a sum of upto Rs.50 lakhs so, however, that at any time the Company's investment together with those of the Directors and their relatives shall not exceed 40% of the proposed issued Equity share capital of the new company which is setting up a plant in Bihar for the manufacsture of mining machinery."

B. WHERE THE INVESTMENT RELATES TO PURCHASE OF SHARES IN AN EXISTING COMPANY.

i) Purchase

"That subject to the approval of the Central Government pursuant to the provisions of Section 372(4) of the Companies Act, 1956, sanction be sand is hereby accorded to the Board of Directors of the Company investing out of the funds of the Company a sum not exceeding Rupees Seven Lakhs and Fifty Thousand in the purchase up to 50,000 fully paid equity shares of Rs.10/- each in the capital of X Printing Company Limited at a price of Rs.15/- per share (exclusive of Share Transfer Expenses) notwithstanding that the investment is in excess of the limits specified in sub-section (2) of the aforesaid Sekction."

ii) Subscription of shares upon exercise option attached to loans.

" That subject to the approval of the Central Government and pursuant provisions of Sejction 372(4) of The Companies Act, 1956, sancjtion be and is hereby accorded to the Board of Directors of the Company to invest by acquiring up to 15,000 Equity Shares of Rs.10/- each in the capital of X Limited at par as and when the Company exercises its option to convert into such shares the whole or any part of the loan of Rupees five lakhs proposed to be granted by the Company to X Limited, at any time within a period of five years from the date of grant of the said loan, notwithstanding that such investment is in excess of the limits specified in sub-section (2) of the aforesaid Section."

5.Guidelines:

1) Approval in general meeting and of the Central Government is required where the proposed investment together with existing investments exceeds:-

a) 10% of the subscribed capital of the other body corporate.

b) 20% of the subscribed capital of the company (in the case of investments in bodies corporate in the same group).

c) 30% of the subscribed capital of the company.

2) No approval is necessary where the investment is in rights shares.

3) The restrictions do not apply to a private company unless it is a subsidiary of public company.

4) The limit of 10% does not apply to an investment company.

5) The resolution is necessary for investment in shares and in the case of bodies corporate in the same gjroup investment in debentures also.

6. Filing: Nil.