Can an investor who has invested in a subsidiary or wholly owned subsidiary company which is private

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Can an investor who has invested in a subsidiary or wholly owned subsidiary company which is private ltd. company, in this case can the parent company allot shares of parent company? 

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Hey Ishank! Let me clarify this for you:

If an investor has invested directly in the subsidiary (a private limited company), then that investment is in the shares of the subsidiary itself.

Now, your question is:
Can the parent company allot its own shares to that investor (who invested in the subsidiary)?

Short answer:

No, the parent company cannot allot shares of itself to an investor who invested only in the subsidiary company.

Explanation:

  • The parent company and the subsidiary company are separate legal entities.

  • Shares of the parent company can only be issued to investors who are shareholders of the parent companyitself.

  • If an investor has invested in the subsidiary, they hold shares in the subsidiary, not the parent.

  • For the parent company to issue shares to an investor, the investor must invest directly in the parent company.

  • There is no automatic right for a subsidiary’s investor to receive shares in the parent company unless there is a specific agreement (like a swap or buyback) or a corporate restructuring.

However:

  • The parent company owns shares in the subsidiary (since it’s the parent).

  • If the parent wants, it can issue shares to investors, but those investors will become shareholders of the parent company, not the subsidiary.

  • If investors want to hold shares in the parent company, they need to subscribe to shares of the parent company directly.


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