Go AD-Free with CAclubindia Pro and Daily Mobile Updates. Subscribe Now!

Wholly owned subsidiary

sanjiv (Asst. Company Secretary) (75 Points)

14 March 2016

Company A holds 100% shares of Company B; Company B holds 100% shares of company C; Company C holds 100% shares of Company D; Company D holds 95% shares of Company E; and Company A holds 5% shares of Company E. Can Company E will be treated as wholly owned subsidiary of Company A?

Reply
Follow
Share

5 Replies

CS Arjun Rajagopal (B.com, ACS) (1056 Points)
Replied 15 March 2016

Company E will be treated as an associate company of company A. Pls refer the defention of associate company - Section 2(6) of the Companies Act, 2013.

“associate company”, in relation to another company, means a company in

which that other company has a significant influence, but which is not a subsidiary

company of the company having such influence and includes a joint venture company.

Here A has significant influence in Company E . Since Company A do not hold more than 50% shares in Company E it will not be a subsidiary but associate company of Company A.

Hope i have clarified your query.

Regards,

Arjun Rajagopal

Jatin Bajaj (CS) (2930 Points)
Replied 21 April 2016

I Completely agree with Arjun. A company is said to be subsidiary of other if other Company holds more than half of the share capital . A Company is said to be wholly owned subsidiary Company of other , if other Company holds entire 100% of the Subsi Company.

So Company A is associate Company of Company E but not wholly owned Subsidiary Company

Pratik Shah (Practising Company Secretary) (4432 Points)
Replied 28 April 2016

Company E shall be considered as Wholly Owned Subsidiary Company. Please refer definition of Subsidiary Company. It has clearly mentioned.."(ii) exercises or controls more than one-half of the total share capital either at ITS OWN OR TOGETHER WITH ONE OR MORE OF ITS SUBSIDIARY COMPANIES.

Sandeep Garg (Consolidation and IndAS Application) (1056 Points)
Replied 28 April 2016

Agree with Mr. Pratik. We need to see direct as well as indirect holding.

CS Arjun Rajagopal (B.com, ACS) (1056 Points)
Replied 28 April 2016

Originally posted by : Pratik Shah
	Company E shall be considered as Wholly Owned Subsidiary Company. Please refer definition of Subsidiary Company. It has clearly mentioned.."(ii) exercises or controls more than one-half of the total share capital either at ITS OWN OR TOGETHER WITH ONE OR MORE OF ITS SUBSIDIARY COMPANIES.