Defining Holding Subsidiary Relation

This query is : Resolved

Pravin Kumar Karn (Querist)
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05 December 2009 Dear Sir

Please Consider a Situation as mentioned below.
compamany A LTD holds 40% Share in D Ltd
Company B Ltd Hold 30% share in D Ltd
and Comapany C LTd Hold 30% Shares in D ltd

Now Comapany A LTD Has Follwoing 7 Directors called
P, Q, R, S, T , U, V

Company B Ltd Has Following 6 Directors
P,Q, R, X,Y,Z

and Company C Ltd Has Following 5 Directors

P,Q, R, G, & H

Now can company D Ltd can be said to be sunsidiary of any of Above three companies Say A Ltd , B Ltd, C ltd

Kindly give reference to Comapnies Act and Accounting Standards Provison.

Jagruti (CS)

Jagruti (CS) (Expert)
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09 December 2009 As per the defination of Subsidiary Co. Company can be said to be sub. of another if that other controls its COmposition of Board of Director or holds more than 50% paid up equity share capital (Sec 4 of Co's Act).

Now just because Directors are common it cannot be said to be Subsidiary. You need to find out if A, B or C has control over Board of Directors of D as follows:Sec 4(2)

(a) that a person cannot be appointed thereto without the exercise in his favour by that other
company of such power as aforesaid;
(b) that a person's appointment thereto follows necessarily from his appointment as director,
managing agent, secretaries and
treasurers, or manager of, or to any other office or employment in, that other company; or
(c) that the directorship is held by that other company itself or by a subsidiary of it.

That other Company means either A, B or C