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Subsidiary

03 January 2014

If C is the subsidiary of B and B is the subsidiary of A...under which section of Companies Act 1956 will C be the subsidiary of B?? I need this information for section 212 compliance where the details of the subsidiary need to be stated.

Plaease help..

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4 Replies

Shivashish (Chartered Accountant) (2796 Points)
Replied 04 January 2014

I think your question is not clear ... are you asking under which section C is subsi of A...???... For this answer is as per AS 21 of companies accounting standard rules 2006 which form part of companies Act,1956

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Still Learning (cs) (234 Points)
Replied 06 January 2014

I guess under XBRL , it is asked under which section of Companies Act 1956 a company is the subsidiary of the other.

In our case..assuming A, B, C are three companies where B is the subsidiary of A and C is the subsidiary of B.

A----->B---->C

We are filing XBRL for B and need to give information about its subsidiaries under section 212 of CA 1956.So under which subsection of s4 will C be the subsidiary of B?

Shivashish (Chartered Accountant) (2796 Points)
Replied 09 January 2014

there are various conditions to be a holding of company. You must see which condition B is holding of on the basis of facts whether by shareholding, part of BOD, etc.

CS BHAVIN SHETH (MANAGER-Company Secretary) (131 Points)
Replied 09 January 2014

Dear Sayali,

As per my Knowledege, Section 4 of Company's Act,1956, given explanation for meaning of Holding Company and Subsidiary Company, Also Extracts of Same is given for your refrence. I hope it will solve your query.

Section 4 in The Companies Act, 1956

4. Meaning of" holding company" and" subsidiary".

(1) For the purposes of this Act, a company shall, subject to the provisions of sub- section (3), be deemed to be a subsidiary of another if, but only if,--

(a) that other controls the composition of its Board of directors; or

(b) 2[ that other-

(i) where the first- mentioned company is an existing company in respect of which the holders of preference shares issued before the commencement of this Act have the same voting rights in all respects as the holders of equity shares, exercises or controls more than half of the total voting power of such company;

(ii) where the first- mentioned company is any other company, holds more than half in nominal value of its equity share capital; or]

1. Cl. (b) omitted by Act 62 of 1956, s. 2 and Sch (w. e. f. 1- 11- 1956 ).

2. Subs. by Act 65 of 1960, s. 3, for cl, (b),

Illustration Company B is a subsidiary of Company A, and Company C is a subsidiary of Company B. Company C is a subsidiary of Company A, by virtue of clause (c) above. It Company D is a subsidiary of Company C, Company D will be a subsidiary of Company B and consequently also of Company A, by virtue of clause (c) above; and so on.

(2) For the purposes of sub- section (1), the composition of a company' s Board of directors shall be deemed to be controlled by another company if, but only if, that other company by the exercise of some power exercisable by it at its discretion without the consent or concurrence of any other person, can appoint or remove the holders of all or a majority of the directorships; but for the purposes of this provision that other company shall be deemed to have power to appoint to a directorship with respect to which any of the following conditions is satisfied, that is to say-

(a) that a person cannot be appointed thereto without the exercise in his favour by that other company of such a power as aforesaid;

(b) that a person' s appointment thereto follows necessarily from his appointment as director, managing agent, secretaries and treasurers, or manager of, or to any other office or employment in, that other company; or

(3) In determining whether one company is a subsidiary of another-

(a) any shares hold or power exercisable by that other company in a fiduciary capacity shall be treated as not held or exercisable by it;

(b) subject to the provisions of clauses (c) and (d), any shares held or power exercisable-

(i) by any person as a nominee for that other company (except where that other is concerned only in a fiduciary capacity); or

(ii) by, or by a nominee for, a subsidiary of that other company, not, being a subsidiary which is concerned only in a fiduciary capacity; shall be treated as held or exercisable by that other company;

1. Subs. by Act 65 of 1960, s. 3, for cl. (c).

(c) any shares held or power exercisable by any person by virtue of the provisions of any debentures of the first- mentioned company or of a trust deed for securing any issue of such debentures shall be disregarded-,

(d) any shares held or power exercisable by, or by a nominee for, that other or its subsidiary[ not being held or exercisable as mentioned in clause (c); shall be treated as not held or exercisable by that other, if the ordinary business of that other or its subsidiary, as the case may be, includes the lending of money and the shares are held or the power is exercisable as aforesaid by way of security only for the purposes of a transaction entered into in the ordinary course of that business.

(4) For the purposes of this Act, a company shall be deemed to be the holding company of another if, but only if, that other is its subsidiary.

(5) In this section, the expression" company" includes any body corporate, and the expression" equity share capital" has the same meaning as in sub- section (2) of section 85.

(6) In the case of a body corporate which is incorporated in a country outside India, a subsidiary or holding company of the body corporate under the law of such country shall be deemed to be a sub- sidiary or holding company of the body corporate within the meaning and for the purposes of this Act also, whether the requirements of this section are fulfilled or not.

(7) 1[ A private company, being a subsidiary of a body corporate incorporated outside India, which, if incorporated in India, would be a public company within the meaning of this Act, shall be deemed for the purposes of this Act to be a subsidiary of a public company if the entire share capital in that private company is not held by that body corporate whether alone or together with one or more other bodies corporate incorporated outside India.]

Regards

BHAVIN SHETH