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Section 186 of the Companies Act, 2013 is related to Loan and Investment by Company. Sub section (1) provides that a company shall unless otherwise prescribed, make investment through not more than two layers of investment companies. Sub-section (2) puts restrictions on giving of loans, guarantee and acquisition of securities

C lause (b) of sub-section (11) of section 186 provides that provisions of section 186 (except section 1) shall apply to any acquisition:

(i)    made by a non-banking financial company registered under Chapter IIIB of the Reserve Bank of India Act, 1934 and whose principal business is acquisition of securities: Provided that exemption to non-banking financial company shall be in respect of its investment and lending activities;

(ii)   made by a company whose principal business is the acquisition of securities;

(iii) of shares allotted in pursuance of clause (a) of sub-section (1) of section 62.

However, it is notable that the above clauses do not make any reference to a banking company or an insurance company or a housing finance company.

By the order of the Ministry of Corporate Affairs (MCA) dated 13-02-2015,a new clause (iv) has been inserted to overcome this difficulty by amending the Companies Act, 2013.

The need of the amendment, as stated by the order is as under:

‘in clause (b) of sub-section (11) of section 186, in the absence of provisions for exemption to a banking company or an insurance company or a housing finance company making acquisition of securities in its ordinary course of business, a difficulty has arisen that such companies cannot make any acquisition of securities in their ordinary course of business’

The relevant extract of the order dated 13-02-2015 are as under:

Now, therefore, in exercise of the powers conferred by sub-section (1) of section 470 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following Order to remove the aforesaid difficulties, namely: - (1) Short title and commencement.- (1) This Order may be called the Companies (Removal of Difficulties) Order, 2015.
(2) It shall come into force on the date of its publication in the Official Gazettee

2. In the Companies Act, 2013 (hereinafter referred to as the said Act),-
(b) in section 186 of the said Act, in sub-section (11), in clause (b), after item (iii), the following item shall be inserted, namely :-

"(iv) made by a banking company or an insurance company or a housing finance company, making acquisition of securities in the ordinary course of its business."

[F No. 1/13/2013-CL.V-Part]

Download the Order Click Here >>
Also Read:
MCA Order amending Small Company Definition  Click Here >>

MCA Order- Section 186 Amended Permitting Acquisition of Securities by Banking, Insurance, Housing Finance Companies | 16-02-2015|