Section 187 of the Act requires companies to hold ‘investments’ in its own name. In this regard Section 187 (1) of the Act reads as below:
‘All investments made or held by a company in any property, security or other asset shall be made and held by it in its own name:’
The meaning of the word “investment” as occurring in Section 187 is quite different from what it means in Section 186. The meaning of investment under Section 186 is most definitely related to investments in securities of any body corporate. However as is evident from the language of Section 187, investment made or held by a company not only in securities, but also in ‘any property or other assets’ would define the purview of the section. The same was the stance under the corresponding Section 49 of the Companies Act, 1956, where the term’ all investments’ was used, whose interpretation cannot be limited to merely securities of the company.
Moving on, an ‘investment’ can obviously arise from an investment activity. As for the meaning of the expression “investment activity”, we may refer to Accounting Standard-3 which defines ‘investing activities’ as:
‘Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents.’
Further, ‘operating activities’ are defined as:
‘principal revenue-producing activities of the enterprise and other activities that are not investing or financing activities.’
Drawing cue from the definition of ‘operating activities’, which does not include investment activities, it is clear that “investment activity” and “operating activity” are mutually exclusive. What the company does as a part of its core business activity cannot be an investment. Investment is investment of a surplus or an amount which are not used in the core operations of the company.
