subsidiary company

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DESAI RONAK P. (Querist)

08 July 2010 how 100% holding in subsidiary co. by holding co. is possible? as minimum 2 members are the basic requirement in company.
please send me quickly answer.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)

08 July 2010 Subscribers to the MOA and AOA shall be-

1) The holding company.
2) An individual.

Then the individual and the holding company has to comply with the provisions of section 187C of the Companies Act,1956.

DESAI RONAK P.

DESAI RONAK P. (Querist)

09 July 2010 if x & y are the director of A ltd. x & Y holds 50-50 % share of the b ltd. wheather A ltd .is consider holding company of b ltd.?

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

26 July 2025 Great question! Let's address both parts:

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### ✅ **1. How is 100% holding in a subsidiary possible if 2 members are needed to form a company?**

Under the **Companies Act, 1956** (in force at the time of your question in 2010), **Section 12** required that a **private company** have at least **two members**.

So how can a company (say A Ltd.) hold **100% shares** of another company (say B Ltd.)?

#### ✅ **Here's how it's done in practice:**

* The **holding company (A Ltd.)** holds **99.99%** of shares.
* The remaining **one share** is held **in the name of a nominee** of the holding company — often a **director or officer** of A Ltd.
* This **nominee holds the share in a fiduciary capacity** (i.e., for and on behalf of the holding company).
* Though technically that 1 share is in another person's name, **beneficial ownership lies with the holding company**.
* Under **Section 187C of the Companies Act, 1956**, such **beneficial ownership** must be disclosed through appropriate filings.

➡️ So **100% effective control** is possible, even if technically there's one nominee shareholder.

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### ✅ **2. If X and Y are directors of A Ltd., and both hold 50%-50% shares of B Ltd., is A Ltd. the holding company of B Ltd.?**

No, in this case, **A Ltd. is *not* the holding company of B Ltd.**

#### Here's why:

* As per **Section 4 of the Companies Act, 1956** (now **Section 2(46)** of the Companies Act, 2013), a company is considered a **holding company** of another if:

* It **controls the composition of the board**, or
* It **holds more than 50% of the nominal value of the equity share capital** of the other company.

➡️ In your scenario:

* X and Y **personally** hold 50% each in B Ltd.
* A Ltd. holds **no shares** in B Ltd., nor does it control the board of B Ltd.
* Therefore, A Ltd. is **not the holding company** of B Ltd., even though its directors have full ownership of B Ltd. **in their personal capacity**.

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### ✅ Summary

| Scenario | Is Holding Company? | Why? |
| ---------------------------------------------------------------- | ------------------- | --------------------------------------------------- |
| A Ltd. holds 99.99% of B Ltd. and 1 share held by nominee (X) | ✅ Yes | Effective 100% control through beneficial ownership |
| X and Y (directors of A Ltd.) each hold 50% of B Ltd. personally | ❌ No | A Ltd. itself has no shareholding/control in B Ltd. |

Let me know if you want the modern interpretation under the Companies Act, 2013!

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