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.
Corporate world every holding company having a wholly-owned subsidiary have one or more person as “nominee” shareholders to on record as a registered shareholder holding a nominal number shares in a wholly-owned subsidiary company to satisfy the requirement of the minimum number of members. Treating these registered shareholders as “nominee” is not the perspective of the Company Law but of the Contract Law as applicable to the contract between the company and these shareholders. Let us discuss.
The concept of the wholly-owned subsidiary is best understood by layman than a young student of law – particularly of corporate law. The concept practically understood by professional dealing with a wholly-owned subsidiary. A student called me to understand this: “how possible?” I replied, “No, It is not possible in true sense.” Unless one understands it clearly that it is not possible in a true legal sense, only then, you can understand it. Once understood, you will never believe that a wholly-owned subsidiary is not possible in a true legal sense.
The Patron Government of ease of doing business was earlier considered not favourable for corporate governance. After “successful” demonetization, government looking for all possible measure it seems necessary even though earlier not much liked by it. The enforcement of the provision of limiting layers of subsidiaries is one such law. Ministry of Corporate Affairs on 20th September 2017 notified Proviso to clause (87) of section 2 and –.
UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).
This is my first post after passing of the Companies Bill, 2012 by Rajya Sabha on 8th August 2013. Lok Sabha have already passed this Bill, earlier on 18th December 2012. The Bill is just one signature away from being an Act or two-three step away from come to be in forced by Notification.
Here, I try to study briefly some definitions related to companies under present Bill [Now the Companies Act, 2013]. Readers may please add their inputs in comment section of this post.
Posted in Chapter I - CA2013, Companies Act 2013, Governance and Responsibility
Tagged Associate Company, Banking Company, Body Corporate, Companies Bill 2012, Companies with Special Provisions, Company, Company incorporated outside India, Company Limited by Guarantee, Company Limited by Shares, CorpLaw, Corporate Law, Corporation, Dormant Company, Financial Institution, Government Company, Holding Company, Joint Venture Company, Listed Company, Ministry of corporate affairs, Nidhi Company, Non - Profit Company, One Person Company, Private Company, Producer Company, Public Company, Small Company, Subsidiary Company