In case the subsidiary company satisfies the conditions for exception under section 19 of The Companies Act, 2013, then in that case can the holding company validly allot/transfer shares to the subsidiary?
I faced this doubt while preparing for CA Inter - Corporate and Other Laws.
As per the act (verbatim) -
Subsidiary company not to hold shares in its holding company.— (1) No company shall, either by itself or through its nominees, hold any shares in its holding company and no holding company shall allot or transfer its shares to any of its subsidiary companies and any such allotment or transfer of shares of a company to its subsidiary company shall be void: Provided that nothing in this sub-section shall apply to a case— (a) where the subsidiary company holds such shares as the legal representative of a deceased member of the holding company; or (b) where the subsidiary company holds such shares as a trustee; or (c) where the subsidiary company is a shareholder even before it became a subsidiary company of the holding company.
However, there are two contradictory answers as per ICAI PYQs / MTPs which I have attached herewith.
Any guidance would be greatly appreciated _/\_
CAclubindia
