Subsidiary Company Shareholding in Parent Company

Can subsidiary own shares in parent company?

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Can subsidiary own shares in parent company?

No, a subsidiary company cannot own shares in a parent company as per the Companies Act, 2013. According to the Companies Act, 2013 a subsidiary company by itself or through its nominee cannot hold shares in a holding company. Further, holding companies are also barred by the Companies Act, 2013 from allotting or transferring its shares to a subsidiary company.

However, in special cases, a subsidiary company can hold shares of a parent company as the legal representative of a deceased member of the holding company. Also, a subsidiary company can hold shares of a holding company as a trustee.

Subsidiary Company not to Hold Shares in its Holding Company

The provisions relating to holding of shares by a subsidiary in parent company is mentioned in Section 19 of the Companies Act, 2013, as reproduced below:

(1) No company shall, either by itself or through its nominees, hold any shares in its holding company and no holding company shall allot or transfer its shares to any of its subsidiary companies and any such allotment or transfer of shares of a company to its subsidiary company shall be void:

Provided that nothing in this sub-section shall apply to a case—

(a) where the subsidiary company holds such shares as the legal representative of a deceased member of the holding company; or

(b) where the subsidiary company holds such shares as a trustee; or

(c) where the subsidiary company is a shareholder even before it became a subsidiary company of the holding company:

Provided further that the subsidiary company referred to in the preceding proviso shall have a right to vote at a meeting of the holding company only in respect of the shares held by it as a legal representative or as a trustee, as referred to in clause (a) or clause (b) of the said proviso.

(2) The reference in this section to the shares of a holding company which is a company limited by guarantee or an unlimited company, not having a share capital, shall be construed as a reference to the interest of its members, whatever be the form of interest.

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