Ministry of Corporate Affairs, Government of India (MCA), has on 8 February 2011 issued directions through General Circular No. 2/2011 and Press Note 3/2011 exempting holding companies from attaching specified particulars of its subsidiary companies with the balance sheet of the holding company. The directions have been issued by MCA in terms of Section 212(8) of the Companies Act, 1956 (the Act).

Section 212 of the Act requires holding companies to attach with their balance sheet, the following documents in respect of each of its subsidiary companies viz:

1. Balance sheet;

2. Profit and loss account;

3. Auditor’s report;

4. Director’s report;

5. Statement of holding company’s interest in subsidiary including changes therein if any, etc.

MCA observed that large number of companies were approaching MCA for seeking exemption from attaching the above mentioned particulars of subsidiaries with the balance sheet of the holding company.

Considering globalizing Indian economy, increased number of subsidiaries and introduction of accounting standards on consolidated financial statements, MCA directed that provisions of Section 212 of the Act shall not apply in relation to subsidiaries of those holding companies which fulfill the conditions which include the following:

1. Board of Directors of the holding company has given consent by a resolution for not attaching the balance sheet of the subsidiary with the balance sheet of the holding company.

2. The holding company shall present in its annual report, the consolidated financial statements of holding company and all its subsidiaries audited by its statutory auditors.

3. The consolidated financial statement shall be prepared in strict compliance with the applicable Accounting Standards and, where applicable, Listing Agreement as prescribed by Securities and Exchange Board of India.

4. The holding company shall disclose in the consolidated balance sheet specified information in aggregate for each subsidiary including subsidiaries of subsidiaries.

5. The holding company shall furnish a hard copy of details of accounts of subsidiaries to any shareholder on demand.

6. The holding as well as subsidiary companies in question shall regularly file such data to the various regulatory and Government authorities as may be required by them.

7. The holding company shall give Indian rupee equivalent of the figures given in foreign currency appearing in the accounts of the subsidiary companies along with exchange rate as on closing day of the financial year.

Conclusion

• Approaching MCA on yearly basis for seeking exemption from attaching particulars of subsidiaries with the balance sheet of holding company has been done away with if specified conditions are complied with.

• Consolidation of financial statements will be a prerequisite for an unlisted holding company who wants to avail of the aforesaid general exemption.

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Category : Company Law (3567)
Type : Articles (15318)
Tags : Companies Act (2037) MCA (189)

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