Subsidiary of a board corporate incorporated outside india

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CS Ekta (Querist)
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15 June 2015 Dear Experts

Request your views as to whether an Indian Private Company (being a subsidiary of Foreign Company as per provisions of the Companies Act, 2013) will be deemed to be a Public Company or a Private Company

Company-X, incorporated as private limited Company in India under the Companies Act 1956, is a JV between Company-Y and Company-Z

Company-Y is a Public Company incorporated in India

Company-Z is a public Company incorporated outside India

Company-X was subsidiary of Company Y under Companies Act 1956 by
virtue of holding majority of Equity shares.

However, under the Companies Act 2013, the Company X became the subsidiary of Company Z by virtue of its holding majority of paid up capital which includes preference shares also.

As per provisions of Section 4(7) of the Companies Act, 1956, an Indian private company, being a subsidiary of a body corporate incorporated outside India, would be a deemed public company, if 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.

Similar, provision is not available in the Companies Act, 2013. However as per the MCA circular no. 23/2014 dated 25.06.2014, an existing company regd under companies act 1956,being a subsidiary of the Body Corporate incorporated outside India either as public or private co. by virtue of sec 4(7) of Cos Act 1956, will continue as public or private as the case may be.

In the present case, Company X was the subsidiary of Company Y(Indian Public Co) under Cos Act 1956 but under Companies Act 2013, it became the subsidiary of Company Z

In view of the above, as per provisions of the Companies Act, 2013, whether Company-X will be a treated as the Public Company or Private Company ?

Regards
Ekta

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Guest (Expert)

15 June 2015 Dear Ms/Mrs Ekta,

Can you please clarify how did X become the subsidiary of Y (Indian public co) when majority of x's shares were held by Z (Foreign public co)? If Z holds majority share of X, then Only Z is holding company and Y is only a fellow subsidiary.

CS Ekta

CS Ekta (Querist)
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15 June 2015 Dear GSV

Y is holding majority of equity shares of the Company and under Companies Act 1956, only equity share capital was considered to determine subsidiary. That is why X was subsidiary of Y under Cos Act 1956