How-to Companies Act corporate compliance

How to comply with Companies Act for corporate mutual fund investments

From WebNotes, a public knowledge base. Last updated 19 May 2026. Reading time ~4 min.

Key facts

Section 186	Limits on inter-corporate investments and loans
Board approval	Above thresholds: Board Resolution mandatory
Shareholder approval	Above 60% of paid-up capital + free reserves: special resolution
Compliance burden	Increases with investment scale; minor for treasury MF investments

Procedure

Understand Section 186 frameworkSection 186 of Companies Act 2013 limits inter-corporate loans and investments. Aimed at controlling group-company funds movement. MF investments are generally captured.
Calculate investment thresholdsSection 186 thresholds: Aggregate investments + loans + guarantees up to 60% of (paid-up capital + free reserves + securities premium) OR 100% of free reserves. Whichever is HIGHER allowed without shareholder approval; beyond: special resolution.
Pass Board ResolutionAll investments above Rs 1 lakh need Board approval. Board Resolution: investment amount, scheme, AMC, authorised signatories. Filed with MCA in some cases.
For substantial investment: Shareholder special resolutionIf aggregate exceeds Section 186 limits: pass special resolution (75% majority) at general meeting. Mandatory before investment.
Related-party checkVerify scheme isn’t related-party (e.g., scheme of related AMC). Section 188 disclosures may apply. Audit committee notification if material.
Maintain Register of InvestmentsSection 187: Company must maintain register of investments with dates, amounts, schemes. Updated within 7 days of investment / disposal.
Annual disclosures in audit reportAuditor verifies Section 186 / 187 / 188 compliance. Discloses in audit report. Board Report mentions inter-corporate investments.
ROC filingsForm MGT-14 for special resolutions (within 30 days). Annual return reflects investment positions.

Companies Act compliance for corporate mutual fund investments is governed primarily by Sections 186 (limits on investments / loans), 187 (Register of Investments), and 188 (related-party transactions). For routine corporate treasury MF investments: Board Resolution + Register of Investments suffices. For substantial cross-investment scenarios: special resolution required.

Conflict-of-interest disclosure. This guide is published by webnotes.in for informational purposes. WebNotes has no commercial relationship with any AMC. No affiliate commission is earned. For complex corporate compliance, consult a Company Secretary / Chartered Accountant.

Step-by-step procedure

See the procedure infobox above.

Section 186 thresholds

For a company with paid-up capital + free reserves of Rs 10 crore + free reserves Rs 5 crore = Rs 15 crore:

Section 186 limit (HIGHER of):

60% × 15 crore = Rs 9 crore.
100% × Rs 5 crore = Rs 5 crore.

So: Rs 9 crore (or higher) aggregate investments allowed.

Above this: Special Resolution (75% majority).

Common corporate MF scenarios

Scenario	Compliance
Small treasury (< Rs 50 lakh)	Board Resolution; Register of Investments
Mid-tier treasury (Rs 50 lakh - Rs 5 crore)	Board Resolution; Register; quarterly audit
Large treasury (Rs 5+ crore)	Above + monitor Section 186 limit
Related-party AMC investment	Section 188 disclosures + audit committee

For most SMEs with treasury MF investments: Section 186 limit isn’t binding.

If MF AMC is a related party (e.g., subsidiary, group company):

Audit Committee approval before investment.
Disclosure in Board Report.
May require Shareholder approval if material.

For most retail-AMC investments: no relationship; routine Section 186 framework.

Register of Investments (Section 187)

Maintained by company:

Each investment / disposal entered.
Within 7 days of transaction.
Available for shareholder inspection.
Format prescribed by Companies Act.

Audit and disclosure

Item	Where disclosed
Investments held	Balance Sheet under “Non-current Investments” / “Current Investments”
Movement during year	Notes to Accounts
Section 186 compliance	Auditor’s report
Related-party transactions	Notes; CARO 2020 audit
Investment in MF	Specific note disclosing AMC + scheme

MAT (Minimum Alternate Tax) considerations

For corporate MF investments:

LTCG / STCG / IDCW added to book profits.
MAT calculation may differ from normal tax.
15% MAT rate on book profits (plus surcharge / cess).
Effective tax rate could be MAT, not normal slab.

For companies with substantial MF gains: MAT advisory.

Pre-investment checklist

Check authorised capital + free reserves figures.
Verify Section 186 limit.
Confirm Board has authority via Articles.
Pass Board Resolution.
Verify scheme is not related-party.
Get auditor sign-off on compliance.
Update Register of Investments.

External references

References

Companies Act, 2013 - Sections 186, 187, 188.
Income Tax Act, 1961.
SEBI (Mutual Funds) Regulations, 1996.
CARO 2020 (Companies Audit and Reporting Order).

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Last reviewed: 19 May 2026
Conflicts of interest: WebNotes is independent. No relationship with any broker, registrar or bank named in this article.