CA Intermediate · Corporate and Other Laws · Preliminary
Sunrise Agro Ltd holds 60% of the total voting power in Green Fields Ltd. Green Fields Ltd in turn holds 55% of the voting power in Harvest Pvt Ltd. Both are companies incorporated in India. Under the Companies Act, 2013, what is the relationship between Sunrise Agro Ltd and Harvest Pvt Ltd?
Harvest Pvt Ltd is a subsidiary of Sunrise Agro Ltd. Under the Companies Act, 2013, a company that is a subsidiary of a subsidiary is also a subsidiary of the ultimate holding company, regardless of the effective percentage of indirect shareholding.
- AHarvest Pvt Ltd is a subsidiary of Sunrise Agro Ltd because it is a subsidiary of its subsidiaryCorrect
- BHarvest Pvt Ltd is an associate company of Sunrise Agro Ltd
- CThey are unrelated since Sunrise Agro Ltd holds only 33% effectively
- DHarvest Pvt Ltd is a joint venture of Sunrise Agro Ltd
Explanation
A company is a subsidiary of another if the holding company controls the composition of its board or exercises more than half of the total voting power, and this extends to subsidiaries of subsidiaries. Green Fields is Sunrise's subsidiary (60%) and Harvest is Green Fields' subsidiary (55%), so Harvest is Sunrise's subsidiary. The effective 33% figure is irrelevant.
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