Holding and subsidiary company

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

14 August 2010 Dear Professionals,

What is the difference between Holding and subsidiary Company.Please tell me with a suitable example.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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14 August 2010 A company become holding company in 3 ways
1. owing 51% of share holding on other company(called
subsidary comapany)
2. The company which have controling power on other company
(subsidary company)
3. A company become holding company for its subsidary
companys, subsidary.
Eg: company C is subsidary of company B
company B is subsidary of company A
so,
company C is subsidary of company A

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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14 August 2010 Sec 4 of the Companies Act, 1956 defines holding and subsidiary company. With reference to this, holding company is the one which acquires controlling interest in another company by - (1) acquiring more than 50% of equity capital, (2) having such powers which enables it to appoint or remove majority directors on other company's board, or (3) acquiring holding company of another company through one of the two modes above.

Hence holding company is the controlling company whereas subsidiary company is the controlled company. But legally both are seperate entities and in practical may just operate seperately even in different lines of business.

For detail section check this link----

http://www.vakilno1.com/bareacts/companiesact/s4.htm

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