Page 219 - CA Final PARAM Digital Book.

i it holds not less than 90% of its net assets in the form of investment in equity shares, preference
shares, bonds, debentures, debt or loans in group companies;
ii its investments in the equity shares (including instruments compulsorily convertible into equity
shares within a period not exceeding 10 years from the date of issue) in group companies and
units of Infrastructure Investment Trust only as sponsor constitute not less than 60% of its net
assets as mentioned in clause (i) above;

Provided; that the exposure of such CICs towards InvITs shall be limited to their holdings as
sponsors and shall not, at any point in time, exceed the minimum holding of units and tenor
prescribed in this regard by SEBI (Infrastructure Investment Trusts) Regulations, 2014, as amended
from time to time.

iii it does not trade in its investments in shares, bonds, debentures, debt or loans in group companies
except through block sale for the purpose of dilution or disinvestment;

iv it does not carry on any other financial activity referred to in Section 45I(c) and 45I(f) of the
Reserve Bank of India Act, 1934 except
a) investment in
i bank deposits,
ii money market instruments, including money market mutual funds and liquid mutual
funds
iii government securities, and
iv bonds or debentures issued by group companies,

b) granting of loans to group companies and

c) Issuing guarantees on behalf of group companies.

As per CARO 2020, the auditor is required to report that –
i. Whether the company is a Core Investment Company (CIC) as defined in the regulations
made by the Reserve Bank of India, if so, whether it continues to fulfil the criteria of a CIC,
and in case the company is an exempted or unregistered CIC, whether it continues to
fulfil such criteria; [Paragraph 3(xvi) (c)]

ii. Whether the Group has more than one CIC as part of the Group, if yes, indicate the
number of CICs which are part of the Group; [Paragraph 3(xvi) (d)]

QNO Cl 17--& Other Clauses case studies Old Course – (M23R)
415.000 TITANIUM CNO— CARO.360
LIU Private Limited is a company based out of Mumbai. The company had an authorised capital of ₹ 200
lakh and paid-up capital plus reserves of ₹ 95 lakh as of 31st March. During the audit for the year ended
31st March 202X, the auditor M/s Y&S Associates noted the following points:

(i) On 15th December, the company had total bank borrowings of ₹ 75 lakh. On the said date, the
company received a new loan of ₹ 30 lakh for a new project that was to be developed. However,
the project was shelved on 17th December due to technical reasons, and the whole loan was
paid on the same date.
(ii) During the financial year, a new proceeding was initiated against the company for holding a
benami property worth ₹ 2.5 crore. However, the company's legal team had advised that the
case would not withstand the law and would be dismissed during the hearing in April of next
financial year.
(iii) The company had incurred a cash loss of ₹ 39 lakh during the financial year compared to a cash
profit of ₹ 15 lakh in the previous financial year. The total turnover of the company for the
financial year was ₹ 45 Crore.

During the year, the Y&S Associates had offered to resign from acting as the company's auditors.

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