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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Legislative Framework of Corporate Governance in India

Kaveri Holdings Ltd., an Indian company, and Mr. Rohan Mehta, an Indian citizen, together hold 55% of the paid-up share capital (equity and preference taken together) of Lotus Trading Pte. Ltd., a Singapore-incorporated company that carries on business in India. What is the position under the Companies Act, 2013?

Lotus Trading must comply with the Chapter and prescribed provisions for its Indian business as if it were an Indian company. Section 379(2) is triggered when at least 50% of paid-up capital is held by Indian citizens or Indian bodies corporate, singly or together; 55% qualifies.

  1. ALotus Trading must comply with the relevant Chapter and prescribed provisions regarding its Indian business as if it were an Indian companyCorrect
  2. BLotus Trading is exempt because it is incorporated outside India
  3. CLotus Trading is covered only if Indian citizens alone hold at least 50%, not bodies corporate
  4. DLotus Trading is covered only if the holding exceeds 75% of equity share capital

Explanation

Section 379(2) applies where not less than 50% of paid-up capital, equity or preference or both, is held by Indian citizens and/or Indian bodies corporate, singly or in aggregate. Here 55% is held in aggregate by a company and a citizen. So the company must comply as if incorporated in India for its Indian business. The citizens-only reading is wrong because bodies corporate count too.

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