Chapter XII - Meetings of Board and Its Powers
Section 187
Section 187: holding investments in the company’s own name
A company must make and hold its investments in property, securities or other assets in its own name, subject to the exceptions listed in the section.
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This article is for general information. Refer to the Companies Act, 2013 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) 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:
Provided that the company may hold any shares in its subsidiary company in the name of any nominee or nominees of the company, if it is necessary to do so, to ensure that the number of members of the subsidiary company is not reduced below the statutory limit.
(2) Nothing in this section shall be deemed to prevent a company— (a) from depositing with a bank, being the bankers of the company, any shares or securities for the collection of any dividend or interest payable thereon; or (b) from depositing with, or transferring to, or holding in the name of, the State Bank of India or a scheduled bank, being the bankers of the company, shares or securities, in order to facilitate the transfer thereof:
Provided that if within a period of six months from the date on which the shares or securities are transferred by the company to, or are first held by the company in the name of, the State Bank of India or a scheduled bank as aforesaid, no transfer of such shares or securities takes place, the company shall, as soon as practicable after the expiry of that period, have the shares or securities re-transferred to it from the State Bank of India or the scheduled bank or, as the case may be, again hold the shares or securities in its own name; or (c) from depositing with, or transferring to, any person any shares or securities, by way of security for the repayment of any loan advanced to the company or the performance of any obligation undertaken by it; (d) from holding investments in the name of a depository when such investments are in the form of securities held by the company as a beneficial owner.
(3) Where in pursuance of clause (d) of sub-section (2), any shares or securities in which investments have been made by a company are not held by it in its own name, the company shall maintain a register which shall contain such particulars as may be prescribed and such register shall be open to inspection by any member or debenture-holder of the company without any charge during business hours subject to such reasonable restrictions as the company may by its articles or in general meeting impose.
(4) If a company is in default in complying with the provisions of this section, the company shall be liable to a penalty of five lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.
Introduction
Section 187 prevents investments being held invisibly through others. Exceptions cover nominee shares in a subsidiary to keep its membership at the statutory minimum, deposits with the company’s bankers, securities given as loan security, and depository holdings.
Where securities are held in a depository’s name, the company keeps a register open to members and debenture-holders. The penalty in sub-section (4) was substituted by the Companies (Amendment) Act, 2020 with effect from 21 December 2020.
Key takeaways
Own-name rule
All investments in property, securities or other assets must be made and held in the company’s name.
Listed exceptions
Subsidiary nominee shares, bankers’ deposits, transfers to SBI or a scheduled bank to facilitate transfer, loan security, and depository holdings.
Penalty
Five lakh rupees for the company and fifty thousand rupees for every officer in default.
Apply the rule
Every investment the company makes or holds in property, securities or other assets must be in its own name. The proviso allows shares in a subsidiary to be held by the company’s nominees if necessary to keep the subsidiary’s membership from falling below the statutory limit.
- India Code — consolidated Companies Act, 2013, section 187
- eGazette — MCA notification S.O. 902(E), 26 March 2014 (commencement from 1 April 2014)
- eGazette — Companies (Amendment) Act, 2020 (29 of 2020)
- eGazette — MCA notification S.O. 4646(E), 21 December 2020 (commencement of parts of Act 29 of 2020)
- MCA — Companies (Meetings of Board and its Powers) Rules, 2014, as notified by G.S.R. 240(E)
Check the exceptions
Sub-section (2) permits: (a) depositing shares or securities with the company’s bankers to collect dividend or interest; (b) depositing with, transferring to or holding in the name of the State Bank of India or a scheduled bank that is the company’s banker, to facilitate transfer; (c) depositing or transferring securities to any person as security for a loan to the company or an obligation it has undertaken; and (d) holding securities in a depository’s name as beneficial owner.
Six-month return under clause (b)
If no transfer takes place within six months of the shares or securities being transferred to, or first held in the name of, the State Bank of India or a scheduled bank, the company must, as soon as practicable, have them re-transferred to it or again hold them in its own name.
Maintain the register
For depository holdings under clause (d) that are not in the company’s own name, the company maintains a register with prescribed particulars. It is open to inspection by any member or debenture-holder without charge during business hours, subject to reasonable restrictions in the articles or set in general meeting. Rule 14 of the Companies (Meetings of Board and its Powers) Rules, 2014, as first notified, requires the register in Form MBP 3, with the reasons for not holding the investment in the company’s name. The rule text cited here is the version first notified in 2014; MCA has amended these Rules since, so confirm the current consolidated rule before relying on any figure or form.
Penalty
If the company defaults, it is liable to a penalty of five lakh rupees and every officer in default to a penalty of fifty thousand rupees.
Practical checklist
Do
- Reconcile investment records with registers and depository statements.
- Diary the six-month limit for securities placed with a bank to facilitate transfer.
Avoid
- Do not park investments with group companies or individuals outside the listed exceptions.
- Do not charge members or debenture-holders to inspect the register.
Illustrative example
Hypothetical: pledged shares
A company pledges listed shares it owns to a lender as security for a working-capital loan.
Classify
Clause (c) allows depositing or transferring securities as security for a loan advanced to the company.
Record
If the shares remain in demat form in a depository’s name, update the sub-section (3) register.
Release
On repayment, ensure the shares come back to the company’s own holding.
Outcome
- The pledge is within section 187 as long as it secures a loan or obligation of the company itself.
Glossary
- Beneficial owner
- The person entitled to the benefits of securities held in a depository’s name.
- Nominee shareholder
- A person holding subsidiary shares on the company’s behalf to keep the subsidiary’s membership at the statutory minimum.
Frequently asked questions
Can a holding company keep one share of its subsidiary in a director’s name?
Yes, as the company’s nominee, if necessary to keep the subsidiary’s number of members from falling below the statutory limit.
Are demat holdings allowed?
Yes. Clause (d) permits holding securities in a depository’s name when the company is the beneficial owner, with a register under sub-section (3).
What is the penalty for breach?
Five lakh rupees for the company and fifty thousand rupees for each officer in default.
Need help applying this provision to your situation?
Contact BizeneedLast updated 11 October 2026