Holding and Subsidiary realtionship

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Prabhat Gupta (Querist)
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25 October 2016 There are two companies viz A and B. All the directors of the A company is also directors in the B company except 1 director and A company holds 47 % shares of B company. So, is A company is holding company of B company ?

Jatin Bajaj

Jatin Bajaj (Expert)
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25 October 2016 According to section 2(6) of the Companies Act 2013, Company A is an Associate Company. as per the defination , the company is said to be the associate of other if other Company has significant influence.
Significant influence means holding more than 20% of the share capital of the Company but less than 50%. In the Above case Company A holds 47% of the Share capital in Company B. so it is an associate Company

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Prabhat Gupta

Prabhat Gupta (Querist)
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25 October 2016 In continuation of above question, the directors of A company who aee directors in B company also hold 35 % of shareholding of B company.So now, is B company subsidiary

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Jatin Bajaj

Jatin Bajaj (Expert)
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26 October 2016 no B is not Subsidiary Company. According to section 2(87) of the Companies Act 2013, Subsidiary Company means the Company in which holding Company controlls more than half of the total share capital either at its own or together with one or more subsidiary Companies.
The term Company includes Body Corporate

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Prabhat Gupta

Prabhat Gupta (Querist)
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26 October 2016 I have a little bit confusion that directors of A company who are also directors In B company with 35 % shareholding in B company

Prabhat Gupta

Prabhat Gupta (Querist)
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26 October 2016 continuation of question, are directors have control of A company over B company because sec 2(87) said that " a company in which the holding company controls the composition of the BOD.

Asha Kanta Sharma online

Asha Kanta Sharma

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28 July 2024 To determine the relationship between Company A and Company B, and whether Company A is the holding company of Company B, let’s break down the criteria and the implications of control based on the Companies Act, 2013.

### **1. Definition of Holding Company and Subsidiary Company:**

#### **Holding Company (Section 2(46) of the Companies Act, 2013):**
A company is considered a holding company if:
- It holds more than half of the share capital or voting power of another company (the subsidiary company), or
- It controls the composition of the board of directors of another company.

#### **Subsidiary Company (Section 2(87) of the Companies Act, 2013):**
A company is considered a subsidiary if:
- The holding company controls the board of directors of the subsidiary,
- The holding company holds more than half of the voting power or share capital of the subsidiary,
- The holding company controls the majority of shares.

### **2. Analysis Based on Provided Information:**

- **Shareholding:**
- Company A holds **47%** of the shares in Company B.
- **47%** shareholding is significant but does not constitute more than half of the total shares.

- **Directors:**
- All directors of Company A are also directors of Company B, except one.
- This indicates a strong overlap in the board of directors, which implies significant influence or control.

### **3. Control and Influence:**

#### **Director’s Control:**
- **Control of Board:**
- Section 2(87) mentions that a holding company can control the composition of the board of directors. If the majority of the directors in Company B are also directors in Company A, Company A could be said to have significant influence over Company B’s management decisions.

#### **Percentage of Shareholding:**
- **47% Shareholding:**
- While Company A does not hold more than 50% of the share capital, the presence of shared directors and 47% shareholding can imply a high level of influence.

### **4. Holding Company Relationship:**

**According to the Companies Act:**
- **Company A** may be considered a holding company of **Company B** if it has control over the board of directors and can influence or manage Company B through its directors.

### **5. Practical Implications:**

**Directors' Control:**
- The overlap in directors suggests that Company A likely has a significant say in Company B’s decisions, especially if these directors have a controlling influence.

**Board Composition Control:**
- Section 2(87) of the Companies Act focuses on the control of the board composition. If the majority of the board members of Company B are from Company A, it might imply that Company A has control over the board.

**Shareholding Influence:**
- Although Company A does not hold a majority of the shares, the strong director overlap and significant shareholding (47%) suggest a significant degree of influence.

### **Conclusion:**

Based on the information provided:
- **Company A** might be considered a holding company of **Company B** if the overlap in directors indicates control over the board of Company B.
- The shareholding alone does not establish control but combined with the director overlap, it suggests a significant level of influence.

If there is a strong correlation between the board control and shareholding, then Company A could indeed be considered a holding company. However, the exact determination would require a detailed review of the board influence and control in practical scenarios.