Relation of Holding and Subsidiary Companies

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Kapil Choudhary (Querist)
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11 May 2011 Dear's

Can any one provide me the data regarding relations of holding and subsidary companies
means the sections governing there relation

CS Bijoy

CS Bijoy (Expert)
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12 May 2011 A company is a person in the eye of law, it can hold share in another company or have control over it and such inter-connection bringing the relationship of Holding Company and Subsidiary Company. The Company havinmg control over the other is called Holding Company and the other one is called Subsidiary of the previous one.
Section 4 of the Companies Act 1956:
:
(1) For the purposes of this Act, a company shall, subject to the provisions of subsection (3), 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.

Section 212 of the Companies Act:
As per this sec the Balance Sheet and Profit & Loss Account of the subsidiary has to be attached to the annual report of the holding company.
Beside the above, the following companies will be treated as subsidiary and holding company:
1) A body corporate incorporate outside India and according to the law of that country it is a subsidiary or a holding company.
2) A body incorporated outside india that would be a public company if incorporated in India has a private as its subsidiary in India , such private company shall be a subsidiary of a public company if it is not a wholly owned subsidiary of that foreign body.

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Kapil Choudhary

Kapil Choudhary (Querist)
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12 May 2011 dear can you help me out somewhat more regarding there relations
means actually i need the all provisions of companies act regarding holding and subsidiary companies

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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21 July 2025 Sure! Here's a detailed summary of the relationship between Holding and Subsidiary Companies under the Companies Act, 1956 and 2013 with relevant sections and provisions:

1. Definition of Holding and Subsidiary Company
Holding Company: A company that controls another company.
Subsidiary Company: A company controlled by another company (holding company).
2. Legal Provisions under Companies Act
a) Section 4 of Companies Act, 1956 (Definition of Subsidiary Company)

A company shall be deemed to be a subsidiary of another company if:

(a) That other company controls the composition of its Board of Directors; or
(b) That other company:
(i) Holds more than half of the total voting power of such company; or
(ii) Holds more than half in nominal value of its equity share capital; or
(c) The company is a subsidiary of any other company which is that other company’s subsidiary.
Note: This also covers cases where a foreign company holds shares.

b) Section 2(87) and Section 2(46) of Companies Act, 2013

Section 2(87): Holding Company
A company that controls the composition of the Board or exercises or controls more than 50% of the total voting power of another company.
Section 2(46): Subsidiary Company
A company in which another company (the holding company) controls the composition of the Board or exercises more than 50% of the voting rights.
c) Section 212 of Companies Act, 1956

The holding company must attach the Balance Sheet and Profit & Loss Account of its subsidiary company to its own financial statements.
This is to provide transparency on the subsidiary’s performance.
d) Section 129 and Schedule III of Companies Act, 2013

Consolidated Financial Statements of the holding company and its subsidiaries need to be prepared as per the accounting standards.
The parent company must disclose its interests in subsidiaries, associates, and joint ventures.
3. Other Important Provisions
Foreign Subsidiaries: A company incorporated outside India is also considered a subsidiary if it meets the criteria under its local laws.
Wholly Owned Subsidiaries: Where the parent company owns 100% shares, it is considered a wholly owned subsidiary.
4. Control Aspects
Control may arise from:

Majority shareholding (>50% voting rights).
Control over Board composition.
Control through agreements or other means.
5. Summary
Aspect Holding Company Subsidiary Company
Control Controls subsidiary (board/voting power) Controlled by holding company
Voting Power >50% voting rights in subsidiary Under control of holding company
Board Control Controls composition of Board of subsidiary Board composition controlled by holding company
Financial Reporting Must prepare consolidated financial statements Financials included in holding company’s reports
Foreign Entities Foreign companies can be holding or subsidiary As per foreign jurisdiction & Indian laws

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