The Concept of Wholly Owned Subsidiary is an anti-thesis of the concept of the company. At least two persons are required to form a company which is true for wholly-owned subsidiary – but in case of wholly-owned companies one or more registered shareholder declare that one or more beneficial interests in their shares are with a particular company or body corporate.
Such a declaration does not transfer beneficial ownership of these shares but certain beneficial interests in these shares.
We earlier discussed here basic concept of the Wholly Owned Subsidiary and claimed that something certainly remains with registered shareholder, nothing is wholly owned by the holding company. Thereafter, we discussed here how so-called nominee is not actually a nominee of holding company conceptually. The concept of the wholly-owned subsidiary is a play of the declaration of the beneficial interest in favour of the holding company. The basis documents to make a company wholly-owned subsidiary are declared filed with the subsidiary company by the registered owner of shares and owner of the beneficial interest in these shares. On the basis of these two documents, a return of beneficial shareholding is filed by the subsidiary company with the registrar of companies.
Holding companies play safe and have a contract between registered shareholders in which subsidiary companies acts as a confirming party. This provides comfort and confirmation of beneficial ownership of beneficial interests in shares registered in the name of the registered shareholder. This is not a confirmation of any beneficial ownership in these shares.
More so, in a contract drafting one may define any terms as per their wishes like legislature defines any terms in an Act and subordinate bodies in rules and regulations. Most of these contract made by holding companies with registered shareholder define these registered shareholders as the “Nominee”. This satisfies their corporate ego. We fellow citizens of corporate nostalgia, a vow before these contractual definitions. Merely because company courts do not reject this term, as no need arise, these terms do not get any legal or judicial confirmation. Whenever a company court requires adjudicating how much beneficial interest holding company own and what remains with register shareholder, it may do without rejecting such improper use of terminology.
Do not mingle of Concept of Nominee, Concept of Beneficial Interest, Concept of Beneficial Ownership, Anti-thesis of Wholly Owned Subsidiary Company. It does not make sense.
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