A ltd, b ltd and z ltd

According to my perception, Z ltd is subsidiary of only A ltd.

Merely having same directors on Board does not make Z Ltd subsidiary of B Ltd. Company has the status of seperate legal entity. Does B Ltd controls the composition of Board of Directors of Z Ltd ??

Sneha

How do you justify or prove that B Ltd controls the composition of Board of Z Ltd in practice. B Ltd claims so.

Regards,

Z Ltd. is a Subsidiary of A Ltd. because more than 50% Share capital of Z Ltd held by A Ltd.

Further as said by Sneha B Ltd. has power to Compose the board of Z Ltd...beacuse majority of Directors in B Ltd directors in Z Ltd. Majority Directors mean has power to affect the decision of Board.

Thanks & Regards

CA Vishal Rana 

I can interpret this on the basis of the fact that Company Z Ltd and its directors have seperate identity. Just because they have four common directors doesnot authorize the Company B Ltd (which is a seperate legal entity) to interfere in the decision making or board composition of Z Ltd

Regards

Sneha Binani

Company Secretary

Fine. Then, separately, when does a company become a subsidiary of another company by virtue of section 4(1)(a) , ie, whjat are the tests to be examined.

Regards,

According to Sec - 4(1)(a) when the Company has the authority to appoint or remove any of the Directors of the other Company. Does B ltd has the power to appoint Mr. ABC in the Board of Z Ltd. And how come B Ltd get that authority ?

Thanks Sneha for your clarification. Now I am able to understand what you are looking at. The answer has come to me with logic.

Possibly what you are saying is B Ltd does not have authority to control , appoint/remove directors of Z Ltd in a general meeting and not Board Meeting as it does not have majority holding in Z Ltd.

Regards,

Here I would like to add if Z Ltd would have taken any loan from B Ltd and the terms of loan gives B Ltd the power to control the composition of Board of Z Ltd. Similarly any other contract which gives B Ltd such authority then B Ltd could have claimed Z Ltd as its subsidiary (even though B Ltd is not a shareholder of Z Ltd)

Just having a common director cannot partake the characteristic of control.

Also please ensure,  there are no contract between B and Z limited. This could possibly trigger Section 297.