close x


Can a Public company become shareholder of a private company

Chartered Accounatnt


Hello

 

Can a Public Limited Company ( Listed ) become a shareholder of a Private Limited Company?.

 

In other words can a public company invest/ buy ( say 30 % ) in shares of a private limited company.

 

If yes, what is the procedure for the same to be followed both by public and private company

 

Please reply.

 
Reply   
 
Company Secretary


Yes. A public limited company can become a member of a private limited company,.  Since the public company is investing only 30% of the shares of the private company, it would not acquire the status of a holding company.

The procedures to be followed by  the public company to subscirbe to the shares of a private company are -

1) if the investment is within the limits specified in 372A the Board Resolution is sufficient. However ensure that the resolution is passed only in the Meetings of the Board as specified in Section 292 of the Companies Act  and not by way of circular resolution.

2) If the investment exceeds the limits specified in 372A, convene General Meeting and pass a special resolution.

3) The company may authorise such person as it thinks fit to act as its representative at any meeting of the company as per Section 187(1)(a).

As regards private company

1) Receive the share application and money and allot shares by passing a Board Resolution. 

2)  File Form 2 with ROC within 30 days of share allotment.


Total thanks : 3 times

 
Reply   
 


www.aubsp.com


Thanks for  asking a very common question jee..........

Agree with Jaya jee..........

This may also help further more......

 

 

Companies deemed to be public limited company:
A private company will be treated as a deemed public limited company in any of the following circumstances :-

  1. Where at least 25% of the paid up share capital of a private company is held by one or more bodies corporate, the private company shall automatically become the public company on and from the date on which the aforesaid percentage is so held.
  2. Where the annual average turnover of the private company during the period of three consecutive financial years is not less than Rs 25 crores, the private company shall be, irrespective of its paid up share capital, become a deemed public company.
  3. Where not less than 25% of the paid up capital of a public company limited is held by the private company, then the private company shall become a public company on and from the date on which the aforesaid percentage is so held.
  4. Where a private company accepts deposits after the invitation is made by advertisement or renews deposits from the public (other than from its members or directors or their relatives), such companies shall become public company on and from date such acceptance or renewal is first made.

 
Reply   
 

Dear Suresh

Concept of Deemed public company on above grounds has been abolished.

 

Regards- Sudhir


Total thanks : 1 times

 
Reply   
 
Chartered Accountant


Originally posted by : Jayashree S Iyer
Yes. A public limited company can become a member of a private limited company,.  Since the public company is investing only 30% of the shares of the private company, it would not acquire the status of a holding company.
The procedures to be followed by  the public company to subscirbe to the shares of a private company are -
1) if the investment is within the limits specified in 372A the Board Resolution is sufficient. However ensure that the resolution is passed only in the Meetings of the Board as specified in Section 292 of the Companies Act  and not by way of circular resolution.
2) If the investment exceeds the limits specified in 372A, convene General Meeting and pass a special resolution.
3) The company may authorise such person as it thinks fit to act as its representative at any meeting of the company as per Section 187(1)(a).
As regards private company
1) Receive the share application and money and allot shares by passing a Board Resolution. 
2)  File Form 2 with ROC within 30 days of share allotment.

AWESOME and FLAWLESS thanks

 
Reply   
 

thanks to both of u...

that was like clearing a doubt in our syllabus...

kudos...

 
Reply   
 
Chartered Accounatnt


Thanks for the reply

Just wanted to know a few more things :

What are the implications in the balance sheet of both the companies i.e to say disclosure requirements since holding is 30 %.

 
Reply   
 
Company Secretary


Only in case of holding-subsidiary relationship, the holding company is required to give details of its subsidiary as required under section 212 of the Companies Act, 1956.

 

Since the shareholding is only 30%, I don't think any disclosure is required to be made.  However if there are common directors in both the companies then the provisions of Section 297, 299, 300, 301, etc. will be applicable.

 

Other experts please confirm if the above is o.k.

 
Reply   
 

Jayashree is correct. No requirement if not a holding company.

 
Reply   
 

Though The query is already resolved, I would add only one thing that if 372A is to be complied with and the Public company is listed, than the compliance shall be through postal ballot.

 
Reply   
 

LEAVE A REPLY



    

Your are not logged in . Please login to post replies

Click here to login   Click here to Register



 



Share on :