CA Intermediate · Corporate and Other Laws · Preliminary
Meridian Traders Pvt Ltd has a wholly owned subsidiary, Meridian Logistics Pvt Ltd. Meridian Logistics holds 60% of the equity voting power in Meridian Retail Pvt Ltd. Under the Companies Act, 2013, what is the legal relationship of Meridian Traders Pvt Ltd to Meridian Retail Pvt Ltd?
Meridian Traders is the holding company of Meridian Retail. Meridian Retail is a subsidiary of Meridian Logistics through more than half the voting power, and Meridian Logistics is a subsidiary of Meridian Traders. The Act treats a subsidiary of a subsidiary as a subsidiary of the ultimate holding company.
- AMeridian Traders is the holding company of Meridian Retail, because a subsidiary of a subsidiary is also a subsidiary of the ultimate holding companyCorrect
- BMeridian Traders has no relationship with Meridian Retail, since it holds no shares directly
- CMeridian Traders is an associate company of Meridian Retail
- DMeridian Traders is a holding company only if it also appoints the majority of Meridian Retail's directors directly
Explanation
Meridian Retail is a subsidiary of Meridian Logistics because Meridian Logistics controls more than half of the voting power. Meridian Logistics is itself a subsidiary of Meridian Traders. The Act treats a company as a subsidiary of another if it is a subsidiary of a company that is a subsidiary of the other, so Meridian Traders is the holding company. Direct shareholding is not required.
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