Holding & subsidiary relationship

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purshotam vyas (Querist)

30 December 2013 Dear all,

I want to know in following case there is any holding-subsidiary relationship or not ?

Case:-
A ltd is holding 48% in B ltd and B ltd is holding 6.5% in A ltd. In both companies there are three directors and out of them two directors are same in both companies.

My question is that- criteria of holding more then 50% is not fulfill so this criteria is not applicable. another criteria is having control in majority composition of director. so if more then 50% directorship is same then can it be treated that control and management is same ?

Thank you so much in advance.........

sunny narwani

sunny narwani (Expert)

30 December 2013 Dear,

As per Section 4 of companies act 1956

the composition of a company' s Board of directors shall be deemed to be controlled by another company if, but only if, that other company by the exercise of some power exercisable by it at its discretion without the consent or concurrence of any other person, can appoint or remove the holders of all or a majority of the directorships

In A NUTSHELL there is nothing to do with mutual/comman director. there need to be POWER to control others composition.

For example if AOA of subsidiary contain that holding companies director have the power to change the composition of the board than it can be said to have holding subsidiary relation.

I hope the situation is clear to you now...

purshotam vyas

purshotam vyas (Querist)

31 December 2013 Thank u so much sir,

Now it is clear that merely common director does not exist power in composition of board of directors.

sir can you please tell me about POWER definition or is it defined ?

sunny narwani

sunny narwani (Expert)

31 December 2013 As per my view the power defination is not defined however you can take power as an right to do something..... in the absence of such right you cannot do that sumthing.....

Feel free to ask if confusion arises

purshotam vyas

purshotam vyas (Querist)

31 December 2013 Once again thanks...

1) again power means right so how we will show RIGHT in documents.
2) in may above case- two director are similar as i have said, adding one more thing that if two similar director are employee of another company or group company then can we treat it as control.....

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