Holding and Subsidiary Companies

G. Holding and Subsidiary Companies A company which control another company is known as holding company and the company so controlled is termed as subsidiary company. A company is deemed to control another company in each of the following cases(i) ifit cotn,ls the composition of the Board of Directors of another company. The composition of the Board of Directors is said to be controlled by another, if the latter has thl power, without the consent or concurrence of any other person, to appoint or remove the holde.rs of all or a majority of the directorships. [Sec. 4(2)].The control of the composition of the board of directors of another company is more relevant in case of a company limited with guarantee or an unlimited company without share capital.
(ii) if it holds more than 50 per cent of nominal value of equity shares in another company.
In determining the majority holding, the following will not be considered-(a) shares held in fiduciary capacity i.e., in trust for others, (b) shares held or power


exercised by virtue of trust deed of debentures issued by the subsidiary company and (c) shares held by a company as security oloans. advanced by it, if its main business is to lend money [Sec. 4 (3)].
(iii) in the case of a private company in respect softhearted preference shareholders and equity shareholders may enjoy similar voting rights and the holding company itself is a private company, holds more than 50 per cent of its total voting rights;
(iv) A company shall be deemed to be controlling another company, if another company is a subsidiary of the first mentioned company's subsidiary. For example, if company B is a Subsidiary of Company A and Company C is a subsidiary of company B, then company C is also a subsidiary of company

H. One M.m Company or Family Compnny. A company in which one man holds practically the whole of the share capital of a company and takes a few more dummy members (usually his fami,ly members, friends and relatives) simply to meet the statutory requirement of the minimum number of members one more member in case of a private company and 6 or more members in case of a public company), such a company is known as 'one man company' or 'family company'. Such a company is perfectly a legal company in the eyes of law having separate entity, as distinct from the majority shareholders. Solomon's case is relevant in this regard.