private company which is a subsidiary of public company

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Kavitha (Querist)
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05 November 2009 Hello,
The definition of a public company,incldes a private company which is a subsidiary of a public company.
I would like to know whether the restrictions applicable to a public limited company are applicable to a private company which is a subsidiary of a public company.
And also if the restrictions are applicable whether the private company has to change its name from private limted, to limited.
Regards
Kavitha

UMA SHANKER SHARDA

UMA SHANKER SHARDA (Expert)
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06 November 2009 Yes, the restriction are applicable but it need not to change its name from Private Ltd to limited co.

CS U S Sharda

Kavitha

Kavitha (Querist)
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12 November 2009 Dear Madam,
Thank you for your reply, but can you explain why it is so,as including 'Limited'in the name of a public company is also one of the restrictions that a public company is subjected to.Why a private company which is a subsidiary is not requied to abide with this specific reqirement,is there any provision in law that says that changing the name to limited is not required

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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10 August 2024 In India, the regulatory framework for companies is governed by the Companies Act, 2013. The distinctions between public and private companies and the specific regulations applicable to each are outlined in the Act. Here's a detailed explanation addressing your queries about private companies that are subsidiaries of public companies:

### **1. Definition and Restrictions:**

#### **Definition of a Public Company:**
According to Section 2(71) of the Companies Act, 2013, a public company is defined as:
- A company which is not a private company.
- Includes a subsidiary of a public company.

This definition means that any company that is not a private company and is a subsidiary of a public company is treated as a public company for certain purposes.

#### **Restrictions on Public Companies:**
Public companies are subject to a range of regulatory requirements, including but not limited to:
- **Issuing a Prospectus:** Public companies must issue a prospectus when they raise funds from the public.
- **Minimum Number of Members and Directors:** Public companies have specific requirements regarding the minimum number of members and directors.
- **Restrictions on Transfer of Shares:** Public companies face specific rules on the transferability of shares and disclosure requirements.
- **Corporate Governance:** Public companies must adhere to stringent corporate governance norms, including board composition and audit committees.

### **2. Private Subsidiary of a Public Company:**

#### **Applicability of Restrictions:**
A private company that is a subsidiary of a public company is generally subject to fewer restrictions compared to public companies. While the parent public company’s regulations are applied to the subsidiary to a certain extent, the subsidiary itself operates under the private company rules unless specifically stated otherwise.

- **Name Change Requirement:** The name of a private company does not automatically change to "Limited" just because it is a subsidiary of a public company. The name of a private company remains as "Private Limited" unless the company itself converts into a public company.

### **3. Regulatory Requirements for Private Subsidiaries:**

#### **Regulations Specific to Subsidiaries:**
- **Name Prefix "Limited":** Private subsidiaries do not need to change their name to "Limited" unless they become public companies or are restructured. The name "Private Limited" is suitable for a private company, even if it is a subsidiary of a public company.

- **Compliance with Company Law:** While a private subsidiary must adhere to certain provisions of the Companies Act, 2013, specific public company regulations like those related to the prospectus, shareholder meetings, and disclosures are not directly applicable.

#### **Provision for Name Change:**
- **Conversion to Public Limited Company:** If the private company decides to convert into a public company, it must change its name to include "Limited" and comply with all public company regulations.
- **Regulatory Exemptions:** There is no specific provision in the Companies Act that mandates a private subsidiary of a public company to adopt the suffix "Limited" unless it opts to become a public company or if the company’s circumstances change.

### **Summary:**

- **Restrictions Application:** Private companies, even if they are subsidiaries of public companies, do not automatically need to adopt the public company restrictions or change their name to include "Limited."
- **Name Change:** The requirement to include "Limited" in the name is specific to public companies and does not apply to private companies unless they convert to public status.

The Companies Act, 2013, provides flexibility for private subsidiaries of public companies to operate under the private company regulations unless explicitly required to adopt public company regulations due to specific circumstances or conversion.