Live Course on Drafting of Appeal and Reply of Penalty Notice by CA Sachin Sinha. Register Now!!

Consolidation of financials for holding subsidiary

CA Shraddha Vora (Teamhead) (149 Points)

05 January 2017

As per section 2(87) of Companies Act, 2013, A subsidiary company is a one in which more than one-half of the total share capital of the company is being held by any other company. Further, as per Rule 2(1)(r) of the Companies (Specification of Definition Details) Rules, 2014, total share capital consists of paid up equity share capital and convertible preference share capital In view of the above 2 sections, in case the existing preference shares are converted into compulsory redeemable preference shares, then the holding-subsidiary relation will cease to exist and Consolidation of Financials will not be applicable to the Company?

Reply
Follow
Share

2 Replies

Upender Singh (6 Points)
Replied 06 January 2017

I never heard a case like that but if this is possible that we can convert Convertible p. Shares in redeemable that the relationship of holding amd subsidiary will cease from immediate effect as per section 2(87) read with rule 2(1)(r) of Companies(Specification of Definition Details)Rules,2014

P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad) (8229 Points)
Replied 06 January 2017

I think you are taking it the other way. If the preference share capital is non-convertible, then it will not form part of total share capital and hence to be ignored for the purpose of holding subsidiary relationship.