Holding & subsidiary

This query is : Resolved

Prashant (Querist)
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11 August 2009 Suppose A Pvt Ltd holds say 50% of shares in B Pvt Ltd. Since holding of A Pvt ltd is not more than 50% it cannot become the holding company of B Pvt ltd u/s 4 of the companies act. So how can it become the holding company by having the management control because since share holding is insufficient how one can take control on the board especially when there are only 2 shareholders involved i.e. in the present case A Pvt Ltd holds 50% & say C Pvt Ltd holds 50% share capital of B Pvt Ltd then if A pvt Ltd wants to have holding status of B then how can it acquire management control.

Thanks in advance

Jagruti (CS)

Jagruti (CS) (Expert)
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11 August 2009 the composition of a company's Board of directors shall
be deemed to be controlled by
another company if, but only if, that other company by the exercise of some power exercisable by
it at its discretion without the
consent or concurrence of any other person, can appoint or remove the holders of all or a
majority of the directorships; but for
the purposes of this provision that other company shall be deemed to have power to appoint to a
directorship with respect to
which any of the following conditions is satisfied, that is to say —
(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.