Creation of charge

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Rishi Vyas (Querist)
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16 February 2011 Can a holding company create charge on the property of its wholly owned subsidiary to secure its (Holding company's) Non-convertible debentures?

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Rishi

udit sharma

udit sharma (Expert)
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16 February 2011 In my opinion u can create charge on the property of wholly owned subsidiary for securing Holding Company's Non - Convertible Debentures.

Experts ur views please...

God Bless

CS Udit Sharma

Rishi Vyas

Rishi Vyas (Querist)
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16 February 2011 Dear Udit

Thanks. But could you please substantiate your view.

Regards

Jayashree S Iyer

Jayashree S Iyer (Expert)
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17 February 2011 In my opinion charge can be created only on the property of the Company and not otherwise including that of its subsidiary.

udit sharma

udit sharma (Expert)
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18 February 2011 Mam

I suppose when a Company becomes a Wholly owned subsidiary of some other Company, the managment of the Company goes in the hands of the latter Company. The managment can conduct deal with the assets of the Company, conduct the affairs in the manner they consider appropriate and in the interest of the Company.Due to acquisition of 100% shareholding of the other Company, all the assets, propoerties of the other Company will be the propoerty of the Holding Company and charge can be created on them forsecuring the loans availed by the Holding Company.

Mam can u substantiate ur opinion with some explanation?

Rishi Vyas

Rishi Vyas (Querist)
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18 February 2011 Dear Udit and Madam,

Thanks. I came across the Annual Report of Spanco Ltd. for the year 2009-10. In the section Notes to Accounts it has been mentioned that the holding company created security on the assets of its subsidiary.

For your ready reference providing herewith the link:

Please refer point 3)

https://www.spancotele.com/backoffice/investerpdf/annualpdf/spanco-annual-report-2009-10.pdf

Though this supports the view of Mr. Udit but still it would be better if we look out for some more authentic source like a provision or case law.

Once again thanks to both of you.

Regards
Rishi

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