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section 4(7) of companies act, 1956


Hello All,


I have a query related to Section 4(7), 3(1)(iv)(c) and 4(1)(c), kindly consider the same...


A Pvt Ltd, WOS of a foreign company wishes to Incorporate its JV (Proposed Private company) with Local Company in the ratio 74% for X Pvt Ltd and 26% for local dealer. According to Section 4(7), X Pvt Ltd is Purely Private Company as 100% capital is held by Foreign Body Corporate and only one share is with A company, being nominee on the part of foreign corporate body.

As per section 3(1)(iv)(c) - Public Company means a company which is a private company which is subsidiary of a company which is not a private company.

That means according to section 3(1)(iv)(c), a private company which is Subsidiary of a private company is a purely private company.


As per section 4(1)(c), a company's subsidiary is also the subsidiary of its holding company.

Like A Lts is subsi of B ltd and b ltd is subsi of c ltd, so automatically A ltd id subsidiary of C ltd.


So the main question is:

That the Proposed JV Company, which will be the subsidiary of X Pvt Ltd (X Pvt Ltd is Wholly Owned subsidiary of Foreign Body corporate), what would be the status of Proposed JV Private Company, Purely private company or susidiary of public company ?

Response is awaited,

 

Thanks & regards,

 

HIMANSHU ROVER

 
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Advocate

dear Mr. Grover,

your query is not quite clear. still as per the standing, if A is an indian incorporated company and it holds a single share in the joint venture, then (if the foreign holding co of x is a public co) the JV shall be treated as a public co.


Total likes : 1 times

 
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Company Secretary

dear Mr Singh

The issue is we have to incorporate a JV company , X Pvt Ltd's share 74% and sare of local company will be 26%

X ltd is pvt company u/s 4 (7)

new JV company wud be incorporated as private company

acc to section 4(1) subsidiary of subsidiary is also subsidiary of main holding company

4(7) says subsidiary of froeign private company having less that 100% shareholding is public company evn if incorporated as private company (deemed public)

3(1)(iv)(c) says subsidiary of pvt company is pvt company

x pvt limited is purely private company as per section 4(7)

anything more u wanna ask for answering ?

 
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Advocate

Dear Mr. Grover,

but as you told earlier that A, an Indian co holds a single share in the X co, that means X can not be called a pvt co if its holding co which is a foreign co, is a public co.

so if this is the situation, the JV shall be a deemed public co. 

 
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Advocate

 

Dear Mr. Grover,

but as you told earlier that A, an Indian co holds a single share in the X co, that means X can not be called a pvt co if its holding co, which is a foreign co, is a public co.

so if this is the situation, the JV shall be a deemed public co. 


Total likes : 1 times

 
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Chartered accountant

Sec 3(1)(iv)(c) says that a private company shall be regarded as a public company if it is subsidiary of a company WHICH IS NOT A PRIVATE COMPANY. Your existing private ltd co is stated to be the subsidiary of a foreign company. Since that foreign company is not a private company  as per the Act, your existing co shall be a public co.

siva208@yahoo.com

 
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Company Secretary

Sir

One share is held by Foreign National in the capacity as nominee of the Holding coompany and thus, the X Pvt Ltd shall be held as private company.


Thanks

Himanshu

 
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Company Secretary

Sir

Sorry to say but read Section 4

Section 4(1) says subsidiary of subsidiary is also subsidiary of Holsing company

Section 4(7) says if foreign holding of India private company holds 100% shares (except one share held by foreign nominee of holding company) evn after that the foreign company is public company, the indian wholly owned subsidiary shall be having the status of PURELY PRIVATE COMPANY.

Thanks

Himanshu

 
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Advocate

firstly, you did not disclose that A is a foreign national and I assumed that A is an Indian co.

Again the words used under the said sec is "entire share capital" which means nt even a single share shuld be out side the scope of the section. 

but here in your query a single share share is held by an individual and not a body corporate which shall make the indian subsidiary a deemed public co if the foreign co (holding co) may be treated as a public co.

 
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Company Secretary

Manish Ji

One share is held by Foreign National and he is holding that in the capacity of the NOMINEE OF THE HOLDING COMPANY so the company is deemed to be the PRIVATE LIMITED COMPANY ad the share is given to that Foreign National as Min 2 number of members is required to form a company as per section 12(1) of the Companies Act, 1956

 

Thanks

Himanshu

 
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