An individual or another Company can hold the shareholding of a Private Limited Company. At the point when another Company holds the offers of a Private Limited Company or Limited Company, there could exist a holding company – subsidiary company relationship. In this article, we would understand holding company, subsidiary company and the procedure for making a holding company – subsidiary company relationship.
Holding Company Meaning
As per Company law, a company controlled by another company is called a subsidiary company, and the controlling company is called a holding company. Thus “control” is used as the benchmark in company law to determine to hold company status. The control can be through control of management or ownership of shares.
As per Companies Act, 2013 the world holding company is defined as a company about one or more other companies, meaning a company of which such companies are subsidiary companies.
A subsidiary company is a company in which the holding company by ideals of control – controls the arrangement of Board of Directors and additionally by ethical capital – activities or controls more than one portion of the aggregate offer capital either at its very own or together with at least one of its subsidiary organisations. The creation of a company’s Board of Directors will be regarded to be controlled by another company if that other company by the activity of some power by it can designate or expel all or majority share of the Directors.
Holding Company – Subsidiary Company Relationship
A holding company – subsidiary company relationship will be set up when:
-The holding company can control the creation of the Board of Directors of the subsidiary company
-Holding company holds over 50% offered capital of the subsidiary company.
The holding firm can hold shares of the subsidiary firm directly or by one or more of its subsidiary firms. Further, If holding firm has a subsidiary Firm B and subsidiary Firm B has a subsidiary Firm C, then subsidiary Firm C will automatically become a subsidiary Firm of A.
Reasons To Create A Holding Company
A holding company – subsidiary company structure can be set up for various reasons. The accompanying are a portion of the notable explanations behind setting up of a holding company – subsidiary company relationship.
Ensuring Controlling And Unity
At the point when a universal or local gathering of organisations are set up with a holding company – subsidiary company structure, it would take into consideration better power over the subsidiary organisations and solidarity among the whole gathering of organisations.
Ease In Transfer
The responsibility for organisations can be effectively shared or moved in a holding company – subsidiary company structure.
Ease Of Funding
Having a holding company – subsidiary company structure would take into account the setting up of worldwide credit limits, in this manner giving financing to small subsidiary organisations at better rates.
Taxation And Benefits
Because of the tradition that must be adhered to, there could be tax assessment benefits for setting up a gathering in a holding company – subsidiary company structure.
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