CA Intermediate · Corporate and Other Laws · Preliminary
Ravi, an Indian resident, holds shares in Rajat Exports Ltd, whose registered office is in Pune. Rajat Exports has a wholly owned subsidiary, Rajat Foods Pvt Ltd, and Rajat Foods is the holding company of a third company, Rajat Packs Pvt Ltd, by controlling the composition of its board. Under the Companies Act, 2013, what is the relationship between Rajat Exports Ltd and Rajat Packs Pvt Ltd?
Rajat Packs Pvt Ltd is a subsidiary of Rajat Exports Ltd. Under the Companies Act, 2013, a company that is a subsidiary of another company's subsidiary is itself treated as a subsidiary of the ultimate holding company. Ravi's shareholding does not affect the relationship.
- ARajat Packs is a subsidiary of Rajat Exports, since a subsidiary of a subsidiary is treated as a subsidiary of the ultimate holding companyCorrect
- BRajat Packs is only an associate company of Rajat Exports
- CRajat Packs has no company-law relationship with Rajat Exports
- DRajat Packs is a subsidiary of Rajat Exports only if Ravi's shares are counted
Explanation
Under the Act, a company is a subsidiary of another if the latter controls the composition of its board or exercises more than half of total voting power. A company is also deemed a subsidiary of a holding company if it is a subsidiary of a company that is itself a subsidiary of that holding company. Rajat Packs is thus a subsidiary of Rajat Exports; Ravi's personal shareholding is irrelevant.
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