Section 187 of the Companies Act, 2013
Section 187 of the Companies Act, 2013
– Investment of company to be held in its own name
📜 Bare Act Text (Simplified):
Section 187(1):
All investments made by a company shall be held by the company in its own name.
Proviso:
The company may hold investments in the name of any nominee or trustee, if:
It is necessary to do so to hold securities on behalf of the company, or
To maintain the company’s rights or ownership over the securities.
Section 187(2):
Where the investments are not held in the company’s own name (e.g., held in a trustee's name), the company must:
Maintain a register with full details: description of investment, value, name of the person holding it, etc.
This register must be open to inspection by members during business hours.
Section 187(3):
If a company contravenes the provisions of this section:
The company will be liable to a penalty of ₹5 lakh, and
Every officer in default will be liable to a penalty of ₹50,000.
✅ Key Points / Summary:
| Topic | Description |
|---|---|
| Main Rule | Investments must be made and held in the name of the company. |
| Exception | Can be held in another name (e.g., nominee) for legal reasons or to preserve ownership rights. |
| Register Required | Yes, if investments not in company’s own name. |
| Inspection | Members can inspect this register. |
| Penalty | ₹5 lakh (company), ₹50,000 (officer in default). |
🧾 Example:
If ABC Ltd. invests in shares of another company, those shares must be registered in ABC Ltd.’s name.
If held in the name of a trustee or nominee, ABC Ltd. must record full details in a separate investment register.
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