10 April 2012
Is A private limited company which is subsidiary of public limited having paid up capital of more than 5 crore require to constitute Audit Committee. ?
10 April 2012
According to section 292A Every public Co having paid up capital not less than Rs.5 crore shall constitute Audit Committee. and as per Section 3 [(iv) "public company" means a company which-
(a) is not a private company;
(b) has a minimum paid-up capital of five lakh rupees or such higher paid-up capital, as may be prescribed;
(c) is a private company which is a subsidiary of a company which is not a private company.]
Now Section 292A is applicable or not for Pvt Ltd co which is Subsidiary of public ltd .
I am giving a logic to u for not applicability on deemed public company:
1. Audit committee will be constituted by minimum three director but a private company requirement is to have only two directors. 2. The Committee will constitute with Independent non executive director but this provision will not apply to private company which is deemed public company.
10 April 2012
Ajay sir: Even I also analysed in the same way as u did. Assume for a public company with more than Rs. 5 Crore capital also has only 3 directors of which one is MD. Even then it has to comply with 292A by appointing some new directors. Same thing will be applicable to Pvt Co which is a subsidiary of Public Co. Deepika: Ur point is excellent. I remember reading about this some where in Ramaiah. I will check and revert back to you on this at the earliest.
As per my knowledge and understanding the provisions will not apply to deemed public company. Under Companies Act, many section specifically says that the provision will apply to private company which is subsidiary of public company.
But the phase was not given in section in 292A so we can not take assumption that this section will apply to deemed public company.
As per my conclusion it will not apply to deemed public company.
10 April 2012
Going by provision of the Companies Act, 1956 and what ajay sir explained, I am also of the opinion that unless specified, this section cannot be made applicable to Pvt Co which is a subsidiary of public co. There is no mention of the same in Ramaiah also.
I am taking your example i.e. 3 director including MD: in that case u can constitute Audit Committee as per given Method: 1. Mr. X (Non executive Director) Chairman 2. Mr. Y (Non Executive Director) Member 3. Mr. Z (Managing Director) Member
Section 292A says....Audit committee which shall consist not less than three director(as above given) of which 2/3rd i.e 2 shall be director other than MD or WTD.
So we are complying section 292A with 3 directors.
I already know...that there is no provision in Ramaya ...because there is no need for clarification. it is crystal clear. I have already short out this matter in lots of deemed public company matter.
10 April 2012
Hi Ajay, Even assume, that Public Company has one MD and one WTD and one other director (total 3). In such cases, we may encounter some problem. In so many companies we have seen one JMD and one WTD. Of course in our group also, we have this situation.
10 April 2012
Exactly. Same explanation can be attributed to Pvt Co which is a subsidiary of Public Co. If the number of non executive directors fall short, even it has to appoint non executive directors and comply with Sec 292A. But I am convinced with ur explanation because if a Pvt Co which is a Sub of a Pub Co is also treated as Public Co, then there is no fun in incorporating such Co as a Pvt Company. Ex: Public Co requires minimum 7 members where as a Pvt Co requires only 2 members. Then there will be a clash in these kind of cases.
It is not a discussion of shareholders members i am talking about committee of Board of Directors members.
For your information if a public or private company or a private company which is a subsidiary of public company not having paid up capital of 5 cr then the provision will also not apply.
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