13 November 2008
K is a private limited company. Its shareholders are ABC- 50 percent shares and XYZ- 50 percent shares. NOw ABC has appointed 2 directors on the Board and XYZ has appointed 3 directors on the Board. Due to the composition of the BOD K Co. becomes subsidiary of XYZ, which is a listed company. Is there any way out by not changing the composition / shreholding pattern remove K from being the subsidiary of XYZ. Ist opition is that can one director be given only casting vote at the time of meeting so that the decission taken at the meeting cannot be favoured for one company. Is it necessary to give directors voting rights.. Kindly guide.... urgent...
13 November 2008
I think both are holding company because both are able to control compostion of BOD of K Ltd. It is of no matter that ABC has appt 2 & XYZ has appt 3. Main is that both are able to control BOD.
13 November 2008
On what basis both are holding company. they only hold 50-50 percent of shares... the XYZ has three directors on Board and it can control the composotion of BOD, as per section 4 of the companies act, 1956..
(2) For the purposes of sub-section (1), the composition of a company's Board of directors shall be deemed to be controlled by another company if, but only if, that other company by the exercise of some power exercisable by it at its discretion without the consent or concurrence of any other person, can appoint or remove the holders of all or a majority of the directorships; but for the purposes of this provision that other company shall be deemed to have power to appoint to a directorship with respect to which any of the following conditions is satisfied, that is to say:-
(a) that a person cannot be appointed thereto without the exercise in his favour by that other company of such a power as aforesaid;
(b) that a person's appointment thereto follows necessarily from his appointment as director 2[***] or manager of, or to any other office or employment in, that other company; or
3[(c) that the directorship is held by an individual nominated by that other company or a subsidiary thereof.]
It means both ABC & XTYZ can have power to appoint even if they do not exercise it.
13 November 2008
Actually neither of ABC or XYZ is a holding company, individually, unless one of them has the absolute power to control the composition of the Board of K Ltd. You have to see also the shareholding agreement if any between these companies as also whether that agreement has been incorporated in AOA.
CAclubindia
