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Shreya Shah (Company Secretary)     04 June 2008

Associate company

Dear All,

Kindly guide me as to what constitutes an Associate company. As per Accounting Standards, a company holding more that 20percent of the voting shares in any other company, that other company is said to be an associate company. This is as per the Accounting Standards, but what about the Companies Act, 1956. do we have the concept of an associate company under the Companies Act, 1956.

Awaiting your response on the same.


Shreya Shah



 4 Replies


The companies act has not defined the concept of associated company. In general associated company means company owned by the same promoters and majority share holders are same and mainly such company company manufacturing/providing services to the parent company apart from the other companies.

Rakesh Chitkara (Service Tax Consultant)     04 June 2008

Service Tax Deptt has sought to plug this loophole where transactions were effected between Associated Companies and no tax was paid. Deptt's auditors are not well trained to highlight such transactions as there were no invoices. It is a far reaching amendment and has the potential to bring windfall revenue and also plethora of litigation. But for expert-consultants, a goldmine. Any one listening ?

True Rakesh,

But issue will be closed before it catches momentum,

sunil (cs)     10 June 2008

In Company act,

Associate company has not been defined,

But Section 370(1B) defined the company under the same management i.e Company controlled by common board of director, managed by same Managing Director or having commony majoriy shareholders having 1/3 voting power constitute company under the same management.

in addition body corporate covered under section 297 and 299 can also be considered related party.



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