♦ HOLDING COMPANY
As per Section 2(46) ‘holding company’, in relation to one or more other companies, means a company of which such companies are subsidiary companies.
♦ SUBSIDIARY COMPANY
As per Section 2(87) “subsidiary company” or “subsidiary”, in relation to any other company (that is to say the holding company), means a company in which the holding company—
(i) controls the composition of the Board of Directors; or
(ii) exercises or controls more than one-half of the total share capital either at its own or together with one or more of its subsidiary companies:
Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed.
Comment: For the purposes of this clause,—
(a) a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company;
(b) the composition of a company’s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors;
(c) the expression “company” includes anybody corporate;
(d) “layer” in relation to a holding company means its subsidiary or subsidiaries;
♦ TRANSFERABILITY OF SHARES
Transfer of shares means transferring title of shares voluntarily, by one party to another party. Transfer of shares has a stamp duty that one needs to pay, based on the market value of shares.
Generally, securities of a company are freely transferable though there may be certain restrictions on the transfer of shares of the private company as provided in their articles. Such restriction on transfer of shares, if one adds any is to protect the interest of shareholders and other security holders.
♦ SHARE-HOLDING OF HOLDING COMPANY BY SUBSIDIARY COMPANY:
No company shall, either by itself or through its nominees, hold any shares in its holding company and no holding company shall allot or transfer its shares to any of its subsidiary companies and any such allotment or transfer of shares of a company to its subsidiary company shall be void:
Provided that nothing in this sub-section shall apply to a case—
(a) where the subsidiary company holds such shares as the legal representative of a deceased member of the holding company; or
(b) where the subsidiary company holds such shares as a trustee; or
(c) where the subsidiary company is a shareholder even before it became a subsidiary company of the holding company:
Provided further that the subsidiary company referred to in the preceding proviso shall have a right to vote at a meeting of the holding company only in respect of the shares held by it as a legal representative or as a trustee, as referred to in clause (a) or clause (b) of the said proviso.
Comment: The reference in this section to the shares of a holding company which is a company limited by guarantee or an unlimited company, not having a share capital, shall be construed as a reference to the interest of its members, whatever be the form of interest.
Disclaimer: The entire contents of this document have been prepared on the basis of relevant and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information. In no event shall I shall be liable for any direct, indirect, special or incidental damage resulting from arising out of or in connection with the use of the inform. We hope that our readers will find this write-up useful in having a better understanding of the background & core aspects. Happy Reading!
THE AUTHOR – CS DEEPAK SETH CAN BE REACHED AT CSDEEPAKSETH@GMAIL.COM or 8800413390