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CA Intermediate · Corporate and Other Laws · Preliminary

Under the Companies Act, 2013, Zenith Pvt Ltd has a paid-up share capital of Rs 3 crore and turnover of Rs 30 crore. Its holding company, Apex Ltd, owns 100% of it. Mr Bose, who sits on the board of Zenith, is asked whether Zenith can be a 'small company'. Which statement is correct?

Zenith cannot qualify as a small company because the statutory definition excludes holding companies and subsidiary companies, along with public companies, section 8 companies and companies under special Acts. Being a wholly owned subsidiary of Apex Ltd disqualifies it regardless of its paid-up capital or turnover.

  1. AIt cannot be a small company because a holding company or a subsidiary company is excluded from the definition of small companyCorrect
  2. BIt is a small company because its paid-up capital does not exceed the prescribed limit
  3. CIt is a small company because turnover is not a criterion
  4. DIt is a small company if the holding company is a public company

Explanation

The definition of small company excludes a public company, a holding company, a subsidiary company, a company registered under section 8, and a company governed by special Act. Zenith is a wholly owned subsidiary, so it is excluded irrespective of its capital and turnover. The other options ignore this exclusion.

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