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Section 4 (7) - plz advice

Neeta (Finance) (345 Points)

21 June 2010

Hello all !

This regards section 4 (7) : Plz tell me does this section has any intention as follows : " A PRIVATE CO. HAVING MAJORITY SHARES FROM FOREIGN COMPANY , IF WANT TO ENJOY THE STATUS OF BEING THE PRIVATE COMPANY, its MEMBERS LIST SHOULD INCLUDE ONLY FOREIGN BODY CORPORATES AND NO INDIVIDUALS ". ( one such opinion has been raised to which i don't agree n doubt.)

As far my understanding , i don't find any such intention. The intention is simply that - " private company having majority shares from foreign company , that foreign company should be a private if incorporated in India , OTHERWISE this private company(indian) will become subsidiary of a public company.

Plz advice .,

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2 Replies

(Guest)

Intention of 4(7) is to bring the Indian Pvt company which is subsidiary of a foreign public company with at par to an Indian pvt company which is subsidiary of Indian Public company.

In India, a Pvt company which is subsidiary of a public company is also treated as a public company under the companies act. So if individuals are holding shares of a pvt company in India the same is not trated as a public company.

The provisions under section 4(7) states that if an Indian pvt company is owned by a one or more foreign body corporate(s) the same shall be pvt company for the provisions of companies act, this is a special exemption.

And the exemption will be lost if the entire shares are not owned by the foreign body corporate(s). so if any share capital of this pvt company if held by individuals (Indian or foreigners) or by Indian company, the pvt company shall be treated as a public company.

Regards

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Deepak Maharishi (CS) (514 Points)
Replied 21 June 2010

Agree with the learned member.

Two simple conditions:

- To permit an indian private company which is a subsy of foreign body corporate if 100% share capital is held by such body corporate (or one or more), to retain the status of PRIVATE LIMITED COMPANY

- To treat an indian private company which is a subsy of a foreign body corporate with less than 100% foreign shareholding by such body corporate (or one or more), as a subsidiary of public company.

Thanks and regards

Deepak Maharishi