Private company to be treated as public company

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Swati Hegde (Querist)
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18 April 2016 Wish to have a clarity on treating Pvt Ltd Company as public company.

Example: ABC Pvt Ltd is a subsidiary of XYZ Ltd (public Company) and is to be treated as public company though it is a pvt Company by definition of Public Company u/s 2(71) of CA 2013. (This is clear by the definition).

further, MNC Pvt Ltd, which is subsidiary of ABC Pvt Ltd, will definitely, also a subsidiary (step down subsidiary) of XYZ Ltd (Public Company).

In my opinion, this MNC Pvt Ltd, though it is a subsidiary of a public company, need not be treated as public company because it is immediate subsidiary of XYZ Ltd, which is Pvt Ltd Company by virtue of its articles(though its a deemed public company).

I wish to have opinion on this, to what extent we should consider Pvt Ltd Company as public limited company. Especially in the case of step-down subsidiary as detailed in the above example.

If the step down subsidiaries of Pvt Ltd Companies also to be treated as public limited companies, then every small pvt ltd company is also required to comply with the provisions which is applicable to public limited companies, which is senseless and huge compliance for such small companies.

Please guide.

Mandar

Mandar (Expert)
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18 April 2016 As per my view, only ABC Pvt. Limited would be considered as a Deemed Public company
Please refer to following judgements:-
• Mallina Bharathi Rao vs The Gowthami Solvent Oils Limited dated 29 December, 2000 :-
The supra of the judgement: “He pointed out that this company, even though a deemed public company, it continues to have the characteristics of a private company.”
• Needle Industries (India) Ltd.,& Ors. vs. Needle Industries Newey (India) Holding Ltd. & Ors. dated May 7, 1981,
Supra of Judgement: - “wherein it was held that a private company which becomes a deemed public company would continue to retain the three basic characteristics of a private company. Such a deemed public company, therefore, would retain the fabric of its constitution and would not have to give up its statutory status with which it was incorporated.”

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Swati Hegde

Swati Hegde (Querist)
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19 April 2016 Many thanks for the clarity with case laws. That was really useful. Thank you.

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Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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19 April 2016 Please read the article in http://taxguru.in/company-law/deemed-public-company-subsidiary-of-public-limited-companies.html

Courtesy - Divesh Goyal Ji.

Swati Hegde

Swati Hegde (Querist)
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19 April 2016 Hi, thanks for the Article link. But still its not clear by the Article or by the above replies, that Subsidiary of Deemed Public Company should be treated as Public Company or their status will be purely Private Company only. This matter is still in question in the Article written by Mr. Divesh Goyal. And in the above reply also the if we study in depth, those case laws speaks only about deemed public company and they are silent in treating subsidiaries of deemed public company as either deemed public company or purely a private company.

Can any one please analyse.?

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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19 April 2016 Pl see sub clause (1) of clause K of the referred writing.