when the company is said to be a subsidiary company of other company?

A,B,C, D,E are directors of X Ltd and out of these, A,B,C are also the directors of Y Ltd. No other directors are there in Y Ltd other than mentioned above.
Is company Y Ltd is then considered as subsidiary of X Ltd if combined shareholding of A,B,C in Y Ltd is :
case 1) above 50%
case 2) below 50%
Replies (4)

For the purposes of sub-section (1), the composition of a company's Board of directors shall be deemed to be controlled by another company if, but only if, that other company by the exercise of some power exercisable by it at its discretion without the consent or concurrence of any other person, can appoint or remove the holders of all or a majority of the directorships ; but for the purposes of this provision that other company shall be deemed to have power to appoint to a directorship with respect to which any of the following conditions is satisfied, that is to say -

(a) that a person cannot be appointed thereto without the exercise in his favor by that other company of such a power as aforesaid ;

(b) that a person's appointment thereto follows necessarily from his appointment as director, or manager of, or to any other office or employment in, that other company ; or

(c) that the directorship is held by an individual nominated by that other company or a subsidiary thereof.

 

 

if this is there that they have controlling power then yes subsidiary.

@ luvish jain, please explain with reference to above example. i already have read the section but i am not getting the answer after reading the above content. so please explain with above example

in simple language if company A has power to appoint directors of other company sat company B without asking consent of Directors of Company B then its controlled entity and so is subsidiary.

luvish jain is rgt, but this power to appoint director comes from shareholding. in nut shell we cn say common directorship doesnt make then holding subsidiary..

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