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Consolidation of financials for holding subsidiary

353 views 2 replies

CA Shraddha Vora

Teamhead

149 Points Posted on 05 January 2017

As per section 2(87) of Companies Act, 2013, A subsidiary company is a one in which more than one-half of the total share capital of the company is being held by any other company. Further, as per Rule 2(1)(r) of the Companies (Specification of Definition Details) Rules, 2014, total share capital consists of paid up equity share capital and convertible preference share capital In view of the above 2 sections, in case the existing preference shares are converted into compulsory redeemable preference shares, then the holding-subsidiary relation will cease to exist and Consolidation of Financials will not be applicable to the Company?

Replies (2)

Upender Singh

6 Points Posted on 06 January 2017

I never heard a case like that but if this is possible that we can convert Convertible p. Shares in redeemable that the relationship of holding amd subsidiary will cease from immediate effect as per section 2(87) read with rule 2(1)(r) of Companies(Specification of Definition Details)Rules,2014

P C Agrawal

Registered independent director Past Ch

8229 Points Posted on 06 January 2017

I think you are taking it the other way. If the preference share capital is non-convertible, then it will not form part of total share capital and hence to be ignored for the purpose of holding subsidiary relationship.