Querry :Section 3(iv)(c) of the Companies Act, 1956

Querry 10
Dear all
As Per the Section 3(iv)(c) of the Companies Act, 1956:
“The Public Company is a Company which is a private Company, which is a subsidiary of a Company of a Company which is not a Private Company”
The question arises that when the Private Company becomes the Subsidiary (or wholly owned subsidiary) of a Public Company:
1 Should the Private Limited Company has to increase its Paid- up capital from 1 lakh to 5 lakh as required for a Limited Company
2 Should the Private Limited Company has to increase its number of members from 2 to 7 as required for a Limited Company
3 Should the Private Limited Company has to increase number of directors from 2 to 3 as required for a Limited Company
SANDIP KUMAR KEJRIWAL, FCSCOMPANY SECRETARIES# 506, CENTRE POINT21 HEMANTA BASU SARANI(OPP GREAT EASTERN HOTEL)KOLKATA 700 001
‘_________________________
Ans.1 To Querry 10
Dear All,
It is not required that the subsidiary company should have 3 directors or 7 members or Rs. 5 lacs paid up share capital but its status is as of public limited company and for all other purposes where certain restrictions put on public limited company such as provisions of section 81 (1A)etc. that restrictions will also applicable to such subsidiary companies
‘________________________
Ans.2 To Querry 10
Hi Sandeep,
All three points mentioned in ur mail are not applicable to a pvt co whichis a subsidiary of a public company. The status of PUBLIC co is only toattract some of the provisions of Cos Act, 1956 and basics are not requiredto be followed.
this is a kind of deeming clause.
Regards,CS Aparna SinghCompany SecretarySanvijay Rolling & Engineering LtdNagpurM +91 93707 66361
Ans.3 To Querry 10
The structure of the company need not be changed by either increasing the size of the Authorised capital or by increasing the number of Directors consequent upon the company becoming a subsidiary of a public ltd company.By way of good secretarial practice once the company gets affected by Section 3(iv)(c),the Board should make a note of this event and record that the company has become a public company for all intents and purposes of law.The company will have to ensure all compliances as is expected of a public company hereonwards after becoming a subsidiary.If the company so desires,by choice it can make amendments to its Articles to withdraw the restrictions as regards number of members,free transferability of shares etc.This is however voluntary.you may also refer to the views of Dr Chandratre on this in his Book"company Law with secretarial practice page no 216(13thEdition).
regards
kalidas
Ans.4 To Querry 10
Dear Sandip
Above all this the company will have to remove the word "PRIVATE LIMITED" and will only use the word "LIMITED".
WITH REGDSCA Nilesh Maradia M: 98337 10601
Ans.5 To Querry 10
Dear all,
Readers are requested to refer to page no.109 (explanatory notes to Section 3) of “A. Ramaiya’s Guide to the Companies Act – 16th edition reprint 2006” which reads as follows:-
Private Company which is subsidiary of public company (Sub-section (1)(iv)(c) of Section 3:
In respect of several sections of the Act where a private company is exempted, it is provided that the exemption will apply only in the case of private companies which are not subsidiaries of public companies. The reason for this is that a private company which is subsidiary of a public company, is throughout in the Act put in the same position as a public company. For, where a private company is subsidiary of a public holding company, it is controlled by the latter, and treated as having the chacteristics of the holding company itself, enjoying the same privileges and rights and subject to the same restrictions, duties and liabilities. Its interests are the interests of the holding company and its acts are the acts of the holding company. Such a company is now statutorily declared as a public company for all purposes under the Act in view of section 3 (iv)(c).
In view of the above clarifications, private company, which is a subsidiary of a public company, is a public company for all practical purposes and are to follow the provisions applicable to a public company.
In other words, the number of members has to be increased to 7, the number of board of directors have to be increased to 3 and the paid-up capital has to be increased to Rs.5 lakhs.
Besides, such companies should also remove the resctrictive clauses from its Articles of Association, which are applicable to only private companies, refer Sec. 27(3) of the Act.
If others have different views/opinions, I invite them to clarify with examples/Department of Corporate Affairs’ notifications/clarifications, if any.
Regards, K. Krishnamoorthy