Section 2(46) Holding company

Chapter I
PRELIMINARY

Provisions of the Companies Act, 2013:
Section 2(46): Holding company.
This provision is brought to force with effect from September 12, 2013.

Corresponding provisions of the Companies Act, 1956:
Section 2(19) and section 4.

Corresponding provisions of the English Companies Act, 2006
Section 1159 and Schedule 6.

Applicability:
Unless the context requires otherwise, the term ‘holding company’ wherever appearing in the Companies Act 2013 shall have the following meaning.

(46) “holding company”, in relation to one or more other companies, means a
company of which such companies are subsidiary companies;

List of some of the provisions where the term ‘holding company’ is used in the Companies Act, 2013:

  1. Employees’ stock option can be given to directors, officers or employees of, inter alia, holding company. [Section 2(37)].
  2. To seek approval of NCLT for following different financial year than April 01 to March 31, where an Indian company is either a holding company or a subsidiary company of a company incorporated outside India and is required to follow different financial year for consolidation of accounts. [first proviso to section 2(41)].
  3. A holding company is treated as related party. [Section 2(76)(viii)].
  4. A holding company cannot be a small company. [provsio to section 2(85)].
  5. Certain class of holding companies can have only limited number of layers of subsidiary companies. [proviso to section 2(87)]. Layer means subsidiary of subsidiary. [Explanation (d) to section 2(87)].
  6. Holding company is prohibited from allotting or transferring its shares to any of its subsidiaries. [section 19(1)].
  7. Company shall not give financial assistance for purchase of its shares or shares of its holding company to any person. [section 67(2)]. An exception being ESOP [section 67(3)(b)] or loan to employees upto 6 months of salary for beneficial ownership [section 67(3)(c)].
  8. Inspection of books of accounts of a subsidiary company is not open to directors of holding company and is open only to such persons, as may be authorised by a resolution of the Board of holding company. [proviso to section 128(3)].
  9. Holding company, in addition to its financial statement (stand alone), shall also prepare consolidated financial statement of itself and its subsidiaries (including its associates and joint ventures). [Section 129(3)]. Holding company shall also attach salient features of financial statements of its subsidiaries (including its associates and joint ventures).
  10. every company having a subsidiary or subsidiaries shall,—
    (a) place separate audited accounts in respect of each of its subsidiary on its website, if any;
    (b) provide a copy of separate audited financial statements in respect of each of its subsidiary, to any shareholder of the company who asks for it. [fourth proviso to Section 136(1)].
  11. a company shall, along with its financial statements to be filed with the Registrar, attach the accounts of its subsidiary or subsidiaries which have been incorporated outside India and which have not established their place of business in India. [fourth proviso to Section 137(1)]
  12. Auditor of holding company can access records of its subsidiary (including its associates and joint ventures) for consolidated financial statement purpose. [proviso to section 143(1)].
  13. An individual can be director of maximum 10 public companies and in reckoning 10 public companies, directorship held in private companies which are either holding or subsidiary company of a public company shall be included. [Explanation to Section 165(1)].
  14. Loan, inter alia, to director of holding company or his relative or partner is prohibited with some exceptions. [section 185].
  15. Shorter procedure for merger or amalgamation of holding company and its wholly owned subsidiary company. [section 233(1)].

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