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closely held company

CA Akshay Joshi (CA) (386 Points)

13 January 2010

wat is closely held company?

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MOHIT MAHAJAN (LCS, ACA) (2050 Points)
Replied 13 January 2010

In simple words a closely held company is a company whose majority shares are held by a small group of shareholders. Generally shares of such companies are not open to outsiders. Such groups of shareholders can also be family members.

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Max Payne (employed) (2574 Points)
Replied 13 January 2010

Closely held company is preceived generally as

unlisted public companies and private companies

Every company which falls in the following categories, is considered a company in which the public is substantially interested,

and Every company which does not fall in the following categories, is considered closely held:

1. a company owned by the Government or the Reserve Bank of India or in which not less than forty per cent of the shares are held (whether singly or taken together) by the Government or the Reserve Bank of India or a corporation owned by that bank

2. Section 25 companies

3. a company having no share capital and if, having regard to its objects, the nature and composition of its membership and other relevant considerations, it is declared by order of the Board to be a company in which the public are substantially interested

4.a mutual benefit finance company, that is to say, a company which carries on, as its principal business, the business of acceptance of deposits from its members and which is declared by the Central Government under section 620A of the Companies Act, 1956

5.a company, wherein equity shares carrying not less than fifty per cent of the voting power have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by, one or more co-operative societies

6. A company which is not a private company and whose shares are listed as on the last day of the previous year, in a recognised stock exchange,

7. A company whose equity shares carrying not less than 50% voting power have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by (a) Govt (b) Corporation established by central or state or provincial legislation or (c) any other company in which the public is substantially interested.

8. In case of an Indian company whose business consists mainly in the construction of ships or in the
manufacture or processing of goods or in mining or in the generation or distribution of electricity or any other form of power, the shareholding referred in point 7 need only be 40%

Thus we see that even unlisted public companies can be one in which public is substantially interested, if the shareholding is by the entities mentioned.

The concept of this classification is mainly to tax pretended loans to related parties of the closely held company as deemed dividend U/s 2(22)(e) of the income tax act.

Just PM if u have any doubt or give me a mail id....

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CA Akshay Joshi (CA) (386 Points)
Replied 15 January 2010

Hi G.K.

thanx for excellent reply

can u plz explain with example

my mail id akyrj7 @ gmail.com

apurv (Student) (22 Points)
Replied 19 February 2010

hey how do u decide what is a small group of shareholders? is der a threshold limit? does it suffice if the public company is not listed on a stock exchange?

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