Meaning and definitions of holding company
When a company acquires ownership of the majority of the common equity capital of a company or is in a position to control and influence the company in any other way, then it is called ‘holder’ or ‘controller’. or is called a ‘subsidiary’ company and the other company over which it is controlled,
called a ‘subsidiary company’ According to section 2(46) of the Companies Act 2013, “a company may be transferred to another company or The holding of companies is considered a company only when that other company or companies is its subsidiaries or companies.” Thus it is clear that the holding company is one which has one or more have more subsidiaries and it controls them legally holding company and Subsidiaries have a separate existence, but in practice they operate as a group and they Collectively also called ‘Group of Companies’.
Meaning and definitions of subsidiary company
Subsidiary company means a company which is owned and controlled by another company
part to the extent that it becomes an instrument for the performance of the orders of the other company. As per section 2(87) of the Companies Act, 2013, a company is a subsidiary of another company.
‘Assistant’ will be in the following cases
(1) this other company has control over the constitution of its board of directors, or (2) that other company owns more than 50% of its common shares, or (3) The company is a subsidiary of a company which is itself a subsidiary of that company.
Features of the holding company
The main features of the holding company can be explained as follows:
1. The holding company controls the management and director of the subsidiary company.
2. The holding company influences the constitution of the board of directors of the subsidiary company. 3. The holding company can buy shares or debentures etc. of the subsidiary company, if it so desires.
4. The holding company can give financial assistance to the subsidiary company.
5. The holding company has majority in the subsidiary company.
6. The holding company would have control over the activities of the subsidiary company
7. The establishment of the holding company leads to centralization of economic power.
8. The policies for the development and expansion of the subsidiary company are made by the holding company.
Conditions for becoming a subsidiary
A company can be a subsidiary of another company in the following circumstances – (1) Control over the constitution of the Board of Directors – When the other company controls the formation of its Board of Directors. The board of directors of the company is considered to be in control of another company only when it has the power, by its resolution, to appoint or remove all or most of the directors without the help of other persons. Such power is deemed to have been fulfilled if any of the following conditions are met—
(A) where one person cannot be appointed as director until the other
The right to appoint a director of a company shall not be exercised: (b) a person is appointed as a director merely because he is a director of that other company; (c) any person nominated by a subsidiary of that other company to the office of director
are working (2) Owner of more than half of the equity share capital – When the first mentioned company owns more than half of the face value of its equity share capital.
(3) Subsidiary company of a subsidiary company – When it is a subsidiary of a company which is itself a subsidiary of that company. If company ‘C’ is a subsidiary of company ‘B’ and company ‘B’ is a subsidiary of company ‘A’, then company ‘A’ is the holding company of both companies ‘B’ and ‘C’ and these two companies ‘A’ The company has subsidiaries.
Object of Holding Company
Following are the main objectives of the holding company:
1. Bringing unity and equality in the policies of different companies- The facilitating company helps in formulating the policy of unity or equality in the policies of different companies.
2. Bringing equality in the financial system- The company in question also brings equality in the financial system of many companies. Being under the same control, different companies can use each other even though they have different capital.
3. Eliminating mutual competition- The purpose of formation of the facilitator company is to promote mutual cooperation between the facilitator and the company by eliminating the mutual competition between them Assistant
4. Centrally Controlling – The oriented company can keep the management of many companies in itself even by appropriating less capital, because it is necessary to buy only the majority of the shares to control the management of the company. This gives the advantage of focused control.
5. Establishment of new companies- Formative companies are formed with the aim of establishing new companies.
6. To increase the efficiency of subsidiaries – the main objective of the establishment of the subsidiary company To improve the condition of subsidiaries and increase their efficiency.