Subsidiary Company

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Querist : Anonymous

Querist : Anonymous (Querist)

01 January 2011 A public limited company want to have a new company as Subsidiary. What all exemptions & benefits the parent earn by having a subsidiary. If no benefit of a subsidiary then will it be legally beneficial to set up a new company with same MD & Directors?

CA Shailesh Kumar Bhagat

CA Shailesh Kumar Bhagat (Expert)

02 January 2011 Any compnay can estblish a subsidiary, as per compnay act.

Querist : Anonymous

Querist : Anonymous (Querist)

02 January 2011 I know any company can establish a subsidiary under company acts, but i want to know what all legal benefits the parent company will get from the subsidiary...otherwise they can incorporate a new company distinct frm the parent company..

Jayashree S Iyer

Jayashree S Iyer (Expert)

03 January 2011 As far as I know, Section 372A which specifies inter-corporate investment limits is not applicable when the holding company acquires securities of its wholly owned subsidiary. Similarly Section 295 whereby CG approval is required for any loans to directors or related parties is not applicable in respect of loan or guarantee given or security provided to its wholly owned subdiary.

As regards floating a new company with same MD / director, there is no restriction, however subject to the condition that the total number of directorship does not exceed the limits (15) specified in Section 275 and in case of MD does not exceed the limit (2) specified in Section 316.

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Jayashree S Iyer

Jayashree S Iyer (Expert)

03 January 2011 Other colleagues, please come out with more such provisions which you may have come across for the benfit of all of us.

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