So to conclude the above discussion though the subsidiary company is included in the definition of a public company only those section where it is specifically mentioned that it will apply to a private company which is a subsidiary of a public company only would apply to such a company like 269, 295 372A and their likes which are not applicable to other private companies in addition.

Yes...for me...

Thanks ANkur Sir for clearing the air.. I never mentioned anything objectionable in my post for Mr Udit to frown upon like that. CA clubinida is forum to share knowledge, nobody can be expected to be perfect here expect for qualified people, i am here to learn a lot more frm people like Ankur Sir and certainly not to argue like Mr Udit..

 Will certainly reply again after discussin the issue with a company secretary whom i respect a lot

Sunny Bhai....do not worry...law main fight ka alag hi maza hai...Deepak Gajrani sir kehta tha khub ladai karo...ha ha ha...and udit is a nice and learned guy...am sure he won't take it otherwise....and am always ready to say sorry....i don't remember kitni bar sorry bola hoga in caclubindia...

So just enjoy the knowldge ride...and be ready to discuss and fight (not personal)....ha ha ha...

Have a nice day !!!

Nice to hear this from Sir... Hope to learn many more things from you sir.. I have completed CA PCC and attempt for final is May 2011, completed Module I of CS Executive and wil take up module II in June 2011. Will surely trouble you in days to come when the doubts pile up

Originally posted by : sunny
	Nice to hear this from Sir... Hope to learn many more things from you sir.. I have completed CA PCC and attempt for final is May 2011, completed Module I of CS Executive and wil take up module II in June 2011. Will surely trouble you in days to come when the doubts pile up

Welcome ji welcome....Also take some time and participate in caclub queries...it is the best way to open up your mind...

Dear All, here is the opinion of an author and consultant in matters of company law and indirect taxes, his books are being published by  a leading book publisher in our country, i m not mentioning his name as i have not taken permission from him. 

""By very definition, the subsidiary of a public company, which is registered as a private company, is a ‘private company’. It means it can have essential characteristics of a private company as defined in section 3(1)(iii), i.e. (a) Restricting right to transfer its shares (b) Limiting number of members to 50 (c) Prohibiting invitation to public to subscribe for shares or debentures of company (d) Prohibiting deposits from persons other than members, directors or their relatives and (e) Minimum capital of Rs one lakh. 

The aforesaid ‘essential characteristics’ are mandatory requirements for a private company. Without these conditions, it cannot be a ‘private company’ at all.


Excluding the essential characteristics of a private company u/s 3(1)(iii), it will have all restrictions and prohibitions that a public company has. As per section 12(1), two persons can form a private company. However, as per section 45, a public company must have minimum seven members. Hence, in my opinion , a subsidiary of a public company can be formed with two members, but within 6 months, the members should be increased to seven. Otherwise, all members will incur personal liability of debts of the company. Further, the company should have minimum three directors. Similarly, quorum for general meeting should be five members personally present.""

Hi Sunny!

Now what you have quoted above is what i was trying to say from such a long time! My intention was only to clear your doubt....if any of the reputed members like you or Ankur sir feels that I have been rude in my replies or have behaved disrespectfully to you then i apologise from the bottom ofmy heart and I am really sorry to all the members who have particiapted in this discussion, if i have hurt any of them my words......never meant to hurt anyone though.....once again sorry Sunny and Ankur Sir:-)

God Bless

Udit Sharma

Everyone is entitled to their own opinions, so i gave mine, thats it.. But after posting mine, i discussed the same with one of the leading authors whom i trust a lot, so just copied the same from his opinion and posted the same. I don't mind making a mistake, as i can learn only through mistakes, if i had not participated in this forum, i probably would not have understood the concept. 

Anyways, no prob, looking forward to discuss many more and learn a lot from the members. 

Dear Udit,

As above said that the basic characteristics of the pvt, co. have no need to change while it become the subsidiary of a public company and no. of directors does not come within the basic characteristic of the company so i think that the no. of directors must be increased to 3.

I think that In case a private company becomes a Subsidiary of public company,

it will not lose the privileges and exemption conferred to the private companies under various provision of the Companies Act, 1956,,,  since there is no default as referred under Section 43 of the Companies Act, 1956............

I also think that in case a private company a subsidiary of a public company, by default it will not be treated as a pubic company unless it complied all the basic conditions of Public company specified in Section 3(1)(iv) of the Companies Act, 1956 viz.,

1. No restriction clause in Articles of Association as specified in Section 3(1)(iii) to comply the condition stated in the Item No.(a) of Section 3(1)(iv),
2. Minimum capital of 5 Lakhs as per the Item No. (b) of Section 3(1)(iv) and
3. should not be a subsidiary of private company as per the Item No. (3) of Section 3(1)(iv)

and not because of attraction in single clause of Section 3(1)(iv) of the Companies Act, 1956. For instance, private company increase it’s paid up capital to Rs. 5 laksh it will not be treated as a public company because of clause 3(1)(iv)(ii) of the Companies Act, 1956. .....

i hope it will help u.......