How a company can acquire 100% share of a another company..?

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 May 2015 Dear experts,,
Plese suggest in the following matter..
" A company want to acquire 100% share of its subsidiary company to make it wholly owned subsidiary company . Is it possible to do so ? if yes how ?...Because the company need to have 2 members and 100% share transfer make it one..." please suggest .......

Querist : Anonymous

Querist : Anonymous (Querist)

06 June 2015 is there any export to ans my query??

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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28 July 2024 Acquiring 100% of the shares of a subsidiary company to make it a wholly owned subsidiary involves a series of legal and procedural steps. Here’s a detailed guide on how a company can achieve this:

### 1. **Understanding the Context**

In India, under the Companies Act, 2013, a company can be a wholly owned subsidiary (WOS) of another company if 100% of its shares are held by the parent company. This process typically involves:

1. **Purchase of Shares**: The parent company must acquire all the shares of the subsidiary company.
2. **Compliance with Legal Requirements**: The process must adhere to company law regulations, including the minimum number of members.

### 2. **Steps for Acquiring 100% Shares**

**A. Agreement and Share Purchase**

1. **Valuation**: Conduct a valuation of the subsidiary to determine the fair value of its shares.
2. **Share Purchase Agreement (SPA)**: Draft and execute a Share Purchase Agreement (SPA) detailing the terms and conditions of the share transfer.

**B. Legal and Regulatory Compliance**

1. **Board and Shareholder Approval**:
- **Parent Company**: Obtain approval from the board of directors and, if required, the shareholders of the parent company to acquire 100% of the shares.
- **Subsidiary Company**: Obtain approval from the board of directors and, if required, the shareholders of the subsidiary company for the transfer of shares.

2. **Transfer of Shares**:
- **Share Transfer Process**: The parent company should purchase all the shares from the existing shareholders of the subsidiary company. This typically involves a formal share transfer process and updating the share register.

3. **Compliance with Companies Act**:
- **Filing with Registrar**: File the necessary forms and documents with the Registrar of Companies (RoC) to reflect the change in shareholding and the status of the subsidiary as a wholly owned subsidiary.
- **Form MGT-14**: For approval of resolutions related to share transfer.
- **Form SH-4**: For registering the share transfer.

4. **Amendment of Memorandum and Articles**:
- If required, amend the Memorandum of Association (MoA) and Articles of Association (AoA) of the subsidiary company to reflect the change in shareholding and any changes in its status.

**C. Addressing the Two-Member Requirement**

1. **Minimum Number of Members**:
- **Company Law Requirements**: According to the Companies Act, 2013, a private company must have at least two members. If the subsidiary is a private company, it must maintain at least two members.

2. **Maintaining Two Members**:
- If the parent company acquires all shares, the subsidiary company should ensure it complies with the two-member requirement. This can be achieved in the following ways:
- **Nominee Shareholders**: Appoint nominee shareholders or additional members if necessary to meet the legal requirement.
- **Conversion**: Consider converting the subsidiary company from a private to a public company, if applicable, which has a different requirement for the number of members.

**D. Post-Acquisition Steps**

1. **Update Corporate Records**: Update the corporate records, including the share register and statutory records, to reflect the new ownership structure.
2. **Compliance Check**: Ensure that all compliance requirements are met, including the filing of annual returns and financial statements reflecting the new structure.

### Summary

To acquire 100% of the shares of a subsidiary and make it a wholly owned subsidiary, the parent company must follow these steps:

1. **Negotiate and Purchase Shares**: Execute a share purchase agreement and complete the transfer of shares.
2. **Obtain Approvals**: Secure necessary approvals from boards and shareholders.
3. **Comply with Legal Requirements**: File necessary forms with the Registrar of Companies and update corporate documents.
4. **Address Membership Requirements**: Ensure the subsidiary meets the minimum membership requirements under the Companies Act.

In the case where the acquisition leads to only one member, appointing nominee shareholders or converting the subsidiary to a public company can address legal requirements.

It’s advisable to consult with legal and financial professionals to ensure compliance with all regulatory requirements and to navigate any complexities associated with the acquisition.

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