Subsidiary of a foreign company

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

31 July 2015 Dear Experts

I am preparing a secretarial compliance checklist for a Private Company. However, when I checked the shareholding details of the company, there is a foreign company holding 98% of the shares of the Indian Private Company. In this case, the Indian Company will become a subsidiary of that foreign company.

My question is: Whether the company will be deemed to be a public company by virtue of section 4 sub-section 7 of the Companies Act, 1956 and provisions applicable to public company will apply. OR will it still be a private company.

Also note, that 10,000 shares are held by the subscribers to the memorandum and the balance by the foreign company.

Regards

Pratik Shah

Pratik Shah (Expert)
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31 July 2015 It will continue to be a private company.
Provisions of Old Act is not applicable now in this regard.

Querist : Anonymous

Querist : Anonymous (Querist)

01 August 2015 Thank you for your reply Sir.

Hence as per the Companies Act, 2013, the provision of deemed public company has been dispensed with.

Therefore, if a private company incorporated in India, which is a subsidiary of a foreign company incorporated outside India, the Indian Company will continue to be a private company and all the provisions applicable to a private company shall apply to the Indian company.

I have also found a circular from MCA in this regard
http://www.mca.gov.in/Ministry/pdf/General_Circular_23_2014.pdf

Please correct me if I am wrong.

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Pratik Shah

Pratik Shah (Expert)
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01 August 2015 Yes..this circular has clarified your doubt. It will continue to be a private limited company.