Sec 295 implications

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Shilpa.N (Querist)

06 September 2013 Is sec 295 applicable for a transaction between two public companies?

Ex- A public company (S co Ltd) which is subsidiary co of Holding Company (H co Ltd) pledged shares held by it as security for a loan taken by H Co Ltd. H co ltd & S co ltd have two common directors.
No board approval was taken for this share pledge.

Is it a violation of sec 295. If yes, what is the remedy?

Pls advise

Ajay Mishra

Ajay Mishra (Expert)

06 September 2013 Hi

As per my understanding of section 42 a subsidiary company con not be a member of its holding company.

So, how Company S Limited can pledge shares of H Limited(holding Co.) shares against loan.

Please confirm, if I am wrong.

Shilpa.N

Shilpa.N (Querist)

06 September 2013 S Ltd is pledging shares held by it of X Co ltd. S ltd does not hold any shares in H Co Ltd

Ajay Mishra

Ajay Mishra (Expert)

06 September 2013 But you have not talking about X Ltd. Any way.

Yes, they can do so, Subsidiary can pledge their shares of other company against loan taken by holding co.

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