Let’s analyse if fixed deposit
with bank is considered to be an investment under the companies act 1956 or not
in different phases:
Phase 1:
In the Companies Act, Section 292,
states certain powers of the Board that is required to be exercised at the
Board meeting only. On an in depth analysis of the same, we can say
The
power to invest the funds of the company (Sec
292 (1)(d))
It is to be exercised only at the board meeting.
Phase 2:
Let us analyse if fixed deposit
forms part of investment. Investment normally means:
-
laying out of money in such a manner that it would
produce some revenue.
-
It can be said that mere deposit of money is not
considered to be an investment and
-
It must be possible to earn an income for a reasonable
length of time. (Hence purchase of property for some purpose other than the
receipt of income is not an investment)
Conclusion:
On analyzing the above it can be said
that placement of surplus of funds by a company in the fixed deposit with the
banks to earn interest income
thereon constitutes investment for the purpose of section 292(1)(d) of the
Companies Act.
Board approval is
required to be obtained in the Board meeting.
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