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Suman Khurana (Company Secretary)     03 June 2009

Incorporation of Pvt. Company



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?



Hinna Garg 


 21 Replies


 Yes. Not an issue

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?


 even i have doubt in this case. But i will surely reply u after referring provisions etc.  


 I enquired here in Ahmedabad and it is found that it is possible to form teh company the way u said.

However tehre would b complication all the way.


 Infact i have not refer any case law or act but this is as per my oral discussion with a Professional in Ahbad.

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.


 Acquiring Pvt Co would not b a probnlem but Heenaji wants to form a Pvt company by a L\Public Comp. That makes complications.

Even i would suggest to acquire a Pvt Company but Heenaji must b having some thought for Forming a Pvt Company. So i didnt insist for this way. 

Anyway..if needed i would b happy to help

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)


 But as far as the question of its possibility is concerned, then i think its possible..Wat u say?

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... :)


 Even i m not sure on the same....Lets have views from other learned professionals. 

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 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.

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