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Querist : Anonymous (Querist)

14 December 2010 diff b/w A ltd and A(P)Ltd.(constitution) how is subsidiary company is shown, please give example

CS Jignesh Mistry

CS Jignesh Mistry (Expert)
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16 December 2010 hi,
can you please detail your question.
thanx

Asha Kanta Sharma

Asha Kanta Sharma

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10 August 2024 **A Ltd vs. A(P)Ltd.: Constitutional Differences**

**A Ltd** and **A(P)Ltd** are examples of company names in India. Here's a breakdown of their differences in terms of company constitution and how subsidiary companies are shown:

### **1. Constitutional Differences**

**A Ltd:**
- **Constitution:** A Ltd typically refers to a **Public Limited Company**. This is a company that offers its shares to the general public and has limited liability.
- **Shareholders:** Can have a large number of shareholders.
- **Regulation:** Regulated by the Companies Act, 2013 in India.
- **Listing:** Can be listed on stock exchanges.
- **Minimum Shareholders:** Requires a minimum of 7 shareholders.
- **Minimum Directors:** Requires a minimum of 3 directors.
- **Compliance:** Must comply with stricter regulations regarding disclosure, auditing, and reporting.

**A(P)Ltd:**
- **Constitution:** A(P)Ltd refers to a **Private Limited Company**. This type of company does not offer its shares to the public at large and has limited liability.
- **Shareholders:** Limited to a smaller number of shareholders.
- **Regulation:** Also regulated by the Companies Act, 2013 but with less stringent disclosure requirements compared to public companies.
- **Listing:** Cannot be listed on stock exchanges.
- **Minimum Shareholders:** Requires a minimum of 2 shareholders.
- **Minimum Directors:** Requires a minimum of 2 directors.
- **Compliance:** Less stringent compliance requirements compared to public companies.

### **2. Subsidiary Company Representation**

**Public Limited Company (A Ltd) Subsidiary:**

In a public limited company, a subsidiary company is typically represented in the following manner in financial statements and disclosures:

- **Consolidated Financial Statements:** A public limited company will include the financial results of its subsidiaries in its consolidated financial statements. This includes combining the assets, liabilities, income, and expenses of the parent company and its subsidiaries.
- **Disclosure Requirements:** Detailed disclosure is required about the nature of the relationship between the parent and subsidiary, including the percentage of ownership, nature of business, and significant transactions.
- **Example:**
- **Parent Company:** A Ltd.
- **Subsidiary Company:** B Ltd.
- **Financial Reporting:** A Ltd will present consolidated financial statements that include B Ltd’s financials. This would show A Ltd’s overall financial position including its ownership and financial results from B Ltd.

**Private Limited Company (A(P)Ltd) Subsidiary:**

In a private limited company, the subsidiary is also represented in financial statements but with different considerations:

- **Consolidated Financial Statements:** A private limited company must also prepare consolidated financial statements if it holds a controlling interest in another company. The same principles apply as for public companies, but the reporting might be less detailed due to fewer regulatory requirements.
- **Disclosure Requirements:** While private companies have fewer disclosure requirements, they still need to disclose their subsidiaries and the nature of their relationship. However, the reporting is generally less comprehensive.
- **Example:**
- **Parent Company:** A(P)Ltd.
- **Subsidiary Company:** C Pvt Ltd.
- **Financial Reporting:** A(P)Ltd will prepare consolidated financial statements that include the financial results of C Pvt Ltd. The reports will reflect the total impact of C Pvt Ltd’s financials on A(P)Ltd’s performance.

### **Example Scenario:**

**A Ltd (Public Limited Company):**
- **Parent Company:** A Ltd
- **Subsidiary:** B Ltd (a company that A Ltd has more than 50% ownership in)
- **Consolidation:** A Ltd will consolidate B Ltd’s financials into its own financial statements. This means that A Ltd’s balance sheet, profit & loss account, and cash flow statement will include B Ltd’s assets, liabilities, revenue, and expenses.

**A(P)Ltd (Private Limited Company):**
- **Parent Company:** A(P)Ltd
- **Subsidiary:** C Pvt Ltd (a company that A(P)Ltd controls)
- **Consolidation:** A(P)Ltd will also consolidate C Pvt Ltd’s financials into its own. The same consolidation process applies but with potentially fewer disclosure requirements compared to a public company.

**Summary:**
The key differences between A Ltd and A(P)Ltd lie in their structure, regulatory requirements, and compliance levels. Both types of companies must consolidate their subsidiaries' financials into their own statements, but the extent and detail of disclosures differ based on whether the parent company is public or private.

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