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Suman Khurana (Company Secretary)     03 June 2009

Incorporation of Pvt. Company

Hi

 

Can we incorporate a pvt. ltd. company as subsidiary of Public Limited Company i.e. one of the promoter of the proposed pvt. ltd company will be public limited company holding 99% shares?

 

Regards

Hinna Garg 



Learning

 21 Replies

Suman Khurana (Company Secretary)     03 June 2009

But Sir

Here ROC is objecting. According to ROC, that proposed pvt. company should be either a public limited company (Because it is proposed to be the subsidiary of public limited Company) or independent pvt ltd. company.

 

ROC is not getting convinced.

 

Can u refer me any private limited company which has recently been incorporated as subsdidiary of public limited company?

CS Pooja (Company Secretary)     08 June 2009

I would like to share my experience with you..

In our organisation, (which is a public limited Co.), we acquired around 23 private limited companies.

Since these were direct subsidiaries of public co., all the provisions applicable to public co. are applicable on them.

Hence we converted them all into public limited companies.

CS Pooja (Company Secretary)     08 June 2009

Even I m very negative on the thought that ROC will allow this.

Just for ref read Section 43A (which is now abolished)

CS Pooja (Company Secretary)     08 June 2009

The logic, I guess is: " Subsidiary of a public limited co. is public"

Hence, when the signatories to MoA is a public co., the co. cant be private...

I may be wrong in logic...but I am sure ROC will not allow it..otherwise we would have been the first people to get it done... :)

vijay Manjrekar (Lawyer)     08 June 2009

Dear Pooja

with due respect, I am unable to appreciate the rationale for converting a private company which is a subsidiary of a public to mean that the private company is to be converted into a public for all purposes of the Companies Act, 1956 ("Act"). In this connection, a parallel analogy may be drawn for companies which are incorporated pursuant to Section 4(7) of the Act wherein a foreign company can incorporate a 99.99% private company with the balance 0.001% being retained by an indian individual by filing a declaration under Section 187C of the Act.

It may be noted that some of the provisions of the Act which apply to a public company apply only to a limited extent to a private company being its subsidiary. Thats why the Act, in several places, provides that "the provisions of the Act will not apply to a private company unless it is a subsidiary of a public company." This means that a private company (being a subsidiary of a public company) can continue to retain its characterisitics of a private company and need not be converted into a public company for all purposes of the Act. 

 

 

CS Pooja (Company Secretary)     08 June 2009

 

Dear Mr. Vijay
Thanks for your comments.
Pl allow me to produce the definition of a Public Company u/s 3 of the Companies Act, 1956 ("Act")
"Public company" means a company which-
 
(a) is not a private company;
 
(b) has a minimum paid-up capital of five lakh rupees or such higher paid-up capital, as may be prescribed;
 
(c) is a private company which is a subsidiary of a company which is not a private company.
 
For similar reasons, ROC will not allow incorporation of a pvt. Co. whose majority shares will be held by a public limited Company, as we can’t go beyond the definition.
 
Hence, it is not obligatory in the Act to convert such a pvt. Co. which is a subsidiary of a public co., into a public company, but as a matter of practice, it is better to do so, for obvious reasons.
 
Noteworthy point is that that at the time of making 43A redundant, the definition of public Company was amended vide Companies (Amendment) Act, 2000.

Pl correct me if I am wrong...as a student...I always value your views...

1 Like

vijay Manjrekar (Lawyer)     08 June 2009

Kindly refer to Hillcrest REalty Sdn Bhd v/s Hotel Queen Road P Ltd (2006) 133 CC 742 (CLB) which dealt with this aspect.

CS Pooja (Company Secretary)     08 June 2009

Thank you, Mr. Vijay, for sharing the valuable knowledge.

The case cited by you makes the point clearer.

But, as already inferred by me...it is not obligatory for the subsidiary of the public to get converted into a public co....

But while incorporating the same, ROC will have objections to it...

As a learned person, may I request you to provide more information on the subject..

Thanks in anticipation..

vijay Manjrekar (Lawyer)     08 June 2009

Could you please clarify what aspects of company law in light of our above discussion do you need clarification? Im sorry am unable to appreciate your concern>>>

CS Pooja (Company Secretary)     09 June 2009

 

Dear Mr. Vijay
My question is crystal clear.
On what basis, will ROC approve the incorporation of a co. as pvt.  which is a subsidiary of a public limited co. when the definition of Public limited co. clarifies that "a pvt. limited co. which is a subsidiary of a public limited co." is a public co.
The case cited, as already mentioned by me, supports that it is not obligatory on the pvt. co. to get converted in to public, consequent upon its becoming subsidiary of a public.

I hope, the question is clear now

PC Agrawal (PCS)     16 June 2009

Dear friends,

I am attaching copy of CLB decision in Hilcrest Realty case wherein it has been held that a private co. which is subsidiary of public co. can retain basic characteristics of a private co. as mentioned in Sec.3(1)(iii) in its Articles.

Regards,

 


Attached File : 8 clb decision on hilcrest realty case sec.3.doc downloaded: 177 times

Suman Khurana (Company Secretary)     16 June 2009

Hi

The final course of action we adopted is to form independent pvt .td. company.

ROC is not ready at any cost to incorporate a pvt. ltd co. as subsidiary of public limited company.

 

Regards

Hinna Garg

J Manivannan (Advocate & Consultant)     01 July 2009

Subsidiary category would be come after incorporation only (If a new company).

The new company can be incorporate with 99% of shares  acquire by public company by way of subscriber to the memorandum and another 1% of can acquire by either individual or another corporate (As per Companies Act, the members must be two for private company).

After incorporation proposed company must fall under subsidiary category (major shares held by public company which is called holding company, given case 99% held by public company) under section 4 of the companies Act.

 

If I wrong kindly advise to me.

 

AJAY MISHRA (CS)     03 July 2009

Hi

ROC only issue Certificate of Incorporation in the name which was approved after Filing Form 1A, After issue of COI the company either be limited or private limited.

 

In any situation company  ROC can not issue a Certificate with addition of  "subsidiary of public company or private company".

 

Regards

 


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