pri Can LLP be the Subsidiary of Company Can LLP be the Subsidiary of Company

WHETHER A LIMITED LIABILITY PARTNERSHIP REGISTERED UNDER LIMITED LIABILITY PARTNERSHIP ACT, 2008 CAN BE THE SUBSIDIARY OF A COMPANY REGISTERED UNDER COMPANIES ACT, 2013-

We can come up with the conclusion after reading through the analysis of following table.

TITLE OF DEFINITION COMPANIES ACT, 2013 LIMITED LIABILITY PARTNERSHIP ACT, 2008
BODY CORPORATE In accordance with section 2(11) of Companies Act, 2013 body corporate includes any company incorporated outside India except following.

a. co-operative societies registered under any law relating to co-operative societies ,and

b. any other body corporate (not being a company as defined in this Act), which the central government may specify in this behalf.

For the purpose of this clause central government specified the body corporate for the purpose of the qualification of auditors in section 226 of Companies Act, 1956 via notification dated May 23, 2011

In accordance with section 2(1)(d) body corporate means a company defined in section 3 of Companies Act, 1956 and includes –

a limited liability partnership under limited liability partnership Act, 2008

SUBSIDIARY in accordance with section 2(87) of Companies Act, 2013

Subsidiary Company or Subsidiary in relation to any other company (that is to say holding company), means a COMPANY in which holding company-

I. controls the composition of board of directors OR

II. EXERCISES OR CONTROLS more than 50 % of the TOTAL VOTING POWER either at its own or together with one or more of its subsidiary companies.

EXPLANATION : for the purpose of section 2(87) expression COMPANY includes BODY CORPORATE

No such provision in Limited Liability Partnership Act, 2008.

EXPLANATION

Limited Liability Partnership is a BODY CORPORATE and if a Company holds 99 percent contribution in limited liability partnership it shall, neither the amount to control the composition of Board of Directors nor amount to exercise or control the more than 50% of total voting power.

REASON FOR ABOVE EXPLANATION.

a. The limited liability partnership shall always have designated partners not the directors and if any body corporate is acting as a designated partners then*

b. a company cannot exercise voting power whatever quantum of voting power in limited liability partnership because no meeting shall be called up except a meeting in accordance with the provision of section 60 (1) of the Limited Liability Partnership Act, 2008.

TOTAL VOTING POWER in accordance with section 2(89) of Companies Act, 2013 total voting power in relation to ANY MATTER, means the total number of votes which may be cast in regard to THAT MATTER on a poll at a MEETING of COMPANY if all the members thereof or their proxies having a right to vote on THAT MATTER are present at meeting and cast their votes. No such definition is defined in Limited Liability Partnership Act, 2008.
CONTROL in accordance with section 2(27) of Companies Act, 2013 shall include

  1. right to appoint the majority of the DIRECTORS or
  2. to CONTROL the MANAGEMENT OR POLICY DECISIONS excercisable by a persons or persons acting individually or in concert, directly or indirectly, including by virtue of their SHAREHOLDING OR MANAGEMENT RIGHTS or SHAREHOLDING AGREEMENTS OR VOTING AGREEMENTS OR IN ANY OTHER MANNER.
SEE MY EXPLANATION UNDER**

*PROVISO OF SECTION 7(1) OF LIMITED LIABILITY PARTNERSHIP ACT, 2008

In accordance with the first proviso of sub section (1) of section 7 of Limited Liability Partnership Act, 2008

“Provided that in case of a limited liability partnership in which all the partners are BODIES CORPORATE or in which one or more partners are INDIVIDUAL AND BODIES CORPORATE, at least TWO INDIVIDUALS who are partners of such limited liability partnership or NOMINEES OF SUCH BODY CORPORATE shall act as designated partners.

CONCLUSION

From the above tabulated conclusion the Limited Liability Partnership can NEVER be a subsidiary of a Company registered under Companies Act, 2013.

______________________________

**MY EXPLANATION

In my opinion, a clarification can be sought from the Ministry of Corporate Affairs by filing a writ before the High Court to pray for judicial interpretation. The clarification from the Ministry of Corporate Affairs in order to remove the difficulty cannot be sought because it has elapsed 5 years from the date of effect of section 1 of the Companies Act, 2013.

In accordance with section 32 of the Limited Liability Partnership Act, 2008, A contribution of a partner may consist of tangible, movable or immovable or intangible or other benefit of the limited liability partnership, including money, promissory notes, other arrangement to contribute cash or property and contract for services performed or to be performed.

If a Company which contributes 99 percent in the form of shares which are the movable property and depends that –

In which entity or entities such company has invested its money to obtain the shares of that entity or entities and contributed the same in the formation of Limited Liability Partnership.

EXAMPLE

A Limited has 99% shares in B Limited then A limited will be the subsidiary of B limited the 99 percent shares of B Limited is with A limited then A limited will be the Holding Company of B Limited. Both A limited and B limited becomes the designated partner in terms of section 7 of Limited Liability Partnership Act, 2008 and contribute their movable property in terms of section 32 in the form of shares ( A ltd : 99% shares and B ltd : 1% shares) in order to register the Limited Liability Partnership and incorporate the same in Limited Liability Partnership Agreement

the particular reason behind is that the word EXERCISE generally use for the word VOTE. the word CONTROL mostly use for the MANAGEMENT, POLICY DECISION which Company Act, 2013 clearly states in section 2(27) in the definition of word CONTROL

From the above example, if difficulty in clause (ii) section 2(87) is to be removed by following substitution.

a. Control or

b. Exercise more than fifty percent of voting total voting power either at its own or together with one or more subsidiary companies.

then a Limited Liability Partnership shall be treated as subsidiary of company for the following three reason of sub section (27) of section 2 of Companies Act, 2013

a. Management by virtue of ANY OTHER MANNER

b. Policy Decision by virtue of ANY OTHER MANNER

c. Management rights.

in section 2(27) the word “any other manner” has not been clarified.

the particular reason behind is that the word EXERCISE generally use for the word VOTE. the word CONTROL mostly use for the MANAGEMENT, POLICY DECISION which Company Act, 2013 clearly states in section 2(27).

Author Bio

Qualification: CS
Company: N/A
Location: Rajasthan, IN
Member Since: 26 Nov 2019 | Total Posts: 1
I am Anand Chura and am the member of the Institute of Company Secretaries of India and Law Graduate. View Full Profile

More Under Company Law

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

July 2021
M T W T F S S
 1234
567891011
12131415161718
19202122232425
262728293031