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section 2(71) Public company

23 July 2019

If private company is a subsidiary of a public company, shall be deemed to be a public company for the purpose of this act even when such subsidiary company continues to be a private company in its articles.

Q. In this case is it require to increase number of members or not in such private subsidiary company?

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3 Replies

Priyanshi Vardiya (12 Points)
Replied 23 July 2019

No there is not required to increase no. Of members

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kapil gupta (217 Points)
Replied 26 July 2019

Hello sh*tanshu

We will discuss your query sequentially.

1.) As per proviso to Section 2(71) of CA, 2013 a private company which is subsi of public company shall be treated as public company for the purpose of this Act except its articles will remain to cover all the 3 restrictions as provided in Sec2(68).

But apart from 3 restrictions such private company(now subsi of public co.) shall fulfill other requirements of public company

Example : Private company (having 2 director) after becoming subsi of public company shall increase its no. of director to 3 due to aforesaid reason.

2.) However, as per sec 3 of the Act i.e Formation of co -

private co shall have min 2 members and public min 7.

So, if such private co. has 2 members it NEED NOT increase its members to 7 because section 3 applies during formation of company not subsequently.

3.) CONCLUSION :- But, for fulfilling quorum requirement as per section 103 it is advisable to such private co to increase the no. of members to 7.

Hope this will satisfy your query

Thanks

1 Like