Procedure For Incorporation Of Subsidiary Company Of An Existing Company
As per provisions of Section 2(87) of the Companies Act, 2013, “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 –
(i) controls the composition of the Board of Directors; or
(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:
As per provisions of the Act, in order to make the proposed company, CD Ltd., a subsidiary of the existing
company, AB Ltd., AB Ltd. must control the composition of the Board of Directors of CD Ltd. or it must exercise or control more than half of the total Share Capital in CD Ltd.
Keeping the above provisions in view, CD Limited shall become a subsidiary of AB Ltd. by a legal fiction and no separate application for registration of the subsidiary is required.
Section 186(1) prohibits a company to make investment through more than two layers of investment companies.
Important Points :
- The New Company Should be formed as such that the existing company must subscribes more than half of share capital of the Company
- Incorporation Procedure will remain same as Normal Company.
