Question

What is meant by Holding and Subsidiary company?

Answer 1

1. Holding Company:

As per Section 2(87) “subsidiary company” or “subsidiary”, in relation to any other company (that is to say the holding company), means a company in which the holding company

• Controls the composition of the Board of Directors; or
• 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:

Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed.

2. Subsidiary Company:

“Subsidiary company” or “Subsidiary”, in relation to any other company (that is to say the holding company), means a company in which the holding company:

• Controls the composition of the Board of Directors; or
• 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:

Examples:

H Ltd. holds more than 50% of the equity share capital of S Ltd. Now H Ltd. is the holding company of S Ltd., and S Ltd. is the subsidiary of H Ltd.