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Deemed to be public company

CS Kaushik Kundu (Company Secretary) (180 Points)

14 September 2016

A Pvt. Ltd. Company which is a subsidiary of Public Company was 3 Directors. In May, 2016 1 Director has resigned. Now, this Pvt. Ltd. Company has 2 Directors.Being Deemed to be Public Company is it required to increase the number of Directors to 3? If so, within how many days numbers will be increased to 3.

Thanks in advance

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3 Replies

Mandar (Associate) (561 Points)
Replied 14 September 2016

The basic charateristics of the Company stays as a Private Limited Company.

In 2006, in case of Hillcrest Realty Sdn. Bhd v.Hotel Queen Road (P.) Ltd.2, the Company Law Board,Delhi Bench held at para. 36 that "all the provisions in the Articles to maintain the basic characteristics of a private company in terms of section 3(1)(iii) will continue to govern the affairs of the company even though it is a subsidiary of a public company".

Company Law Board

Mallina Bharathi Rao vs The Gowthami Solvent Oils Limited ... on 29 December, 2000

Para 4 :- He pointed out that this company, even though a deemed public company, it continues to have the characteristics of a private company.

CA Tanvi Sheth (Consultant) (232 Points)
Replied 14 September 2016

Hello,

The provisions of public companies apply to the deemed public companies except for the few provisions, and so you need to appoint min of 3 directors on BOARD of the company.There was a transition period allowed for complying with the provisions of the ACT but for recent change in company's management, you need to comply with appointment of one more director at the earliest.

Thanks.

Pratik Shah (Practising Company Secretary) (4432 Points)
Replied 15 September 2016

There won't any non-compliance even if deemed public company has only two directors. However, to comply with quorum of board meeting, there has to be atleast 3 directors. Hence, it is necessary to appoint one more director in your case.