Can LLP become holding company of Private Company

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Querist : Anonymous

Querist : Anonymous (Querist)

30 November 2010 Can LLP act as holding company of Private Company

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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30 November 2010 Yes. LLP can act as holding company of Private Company.

In terms of Section 4 of Companies Act, 1956(as amended), a company shall be deemed to be a subsidiary of another if, but only if ,-

(a) that other controls the composition of its Board of Directors; or

(b) that other –

(i) where the first-mentioned company is an existing company in respect of which the holders of preference shares issued before the commencement of this Act have the same voting rights in all respects as the holders of equity shares, exercises or controls more than half of the total voting power of such company;

(ii) where the first-mentioned company is any other company, holds more than half in nominal value of its equity share capital; or

(c) the first-mentioned company is a subsidiary of any company which is that other’s subsidiary

(For full text of Section 4 – please refer to Companies Act)

In this section, the expression "company" includes any body corporate

Now let us see meaning of body corporate...

“body corporate” means a company as defined u/s 3 of the Companies Act, 1956 and includes—

(i) a limited liability partnership registered under LLP Act;

(ii) a limited liability partnership incorporated outside India; and

(iii) a company incorporated outside India,

but does not include—

(i) a corporation sole;

(ii) a co-operative society registered under any law for the time being in force; and

(iii) any other body corporate (not being a company as defined in Section 3 of the Companies Act, 1956 or an LLP as defined in the LLP Act), which the Central Government may, by notification in the Official Gazette, specify in this behalf.

The above definition of body corporate is as per LLP Act, 2008.

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CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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30 November 2010 But as per the definition in companies act...

"body corporate" or "corporation" includes a company incorporated outside India but 6[does not include-

(a) a corporation sole;

(b). a co-operative society registered under any law relating to co-operative societies; and

(c) any other body corporate (not being a company as defined in this Act) which the Central Government may, by notification in the Official Gazette, specify in this behalf;]

The main contention is whether LLP comes in the definition of body corporate or not.

Kept open for views of other experts.

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Aditya Maheshwari

Aditya Maheshwari (Expert)
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30 November 2010 In my view it cannot because it has essence of partnership with it and subsidiary has not been defined in LLP Act.

Ajay Mishra

Ajay Mishra (Expert)
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30 November 2010 Hi

No such provisions in LLP Act, 2008 and LLP Rules, 2009 on the above matter.

Regards

Querist : Anonymous

Querist : Anonymous (Querist)

30 November 2010 will go with Sanjay unless some contrary comes up...

It is clearly written LLP comes under the
definition of Body Corporate...

Answer is yes .. thanks