Holding/ Subsidiary Company

Holding/ Subsidiary Company

As per Section 2(46) “holding company”, in relation to one or more other companies, means a company of which such companies are subsidiary companies;

As per Section 2(87) “subsidiary company” or “subsidiary”, in relation to any other company (that is to say the holding company), means a company in which the holding company—

(i) controls the composition of the Board of Directors; or

(ii) exercises or controls more than one-half of the total share capital either at its own or together with one or more of its subsidiary companies:

Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed.

Explanation.—For the purposes of this clause,—

(a) a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company;

(b) the composition of a company’s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors;

(c) the expression “company” includes anybody corporate;

(d) “layer” in relation to a holding company means its subsidiary or subsidiaries;


If a Company is a Subsidiary of another Company. Following are the implication:- 









Holding Company Financial Statement


Consolidated Financial Statement of holding company is required to disclose prescribe details about subsidiary, associate Companies and Joint ventures.

If more than one Subsidiary


If a Company has one or more subsidiaries, associate companies and Joint Ventures, it shall, prepare a consolidated financial statement of the company and of all the subsidiaries, associate companies and joint venture in the same form and manner as that of its own.

Separate Financial Statement for Holding Company


This Statement is in addition to the Separate financial statement of the holding company. The consolidate financial statement shall also be paid before the annual general meeting of the holding company along with the laying of its own financial statement.


Disclosure in balance Sheet of Holding Company

Balance sheet of holding company shall specifically disclose investments in the subsidiaries.

Disclosure in P&L account of Holding Company


Profit and Loss account of Holding company shall disclose-(a)  Dividends from subsidiary Companies

(b)  Provisions for losses of subsidiary Companies.


Every Company having a subsidiary or subsidiaries has to submit consolidated financial statement in addition to its own ‘financial statement’.

Disclosure on Website(such disclosure is required

only if the company has its website)




Company is required to:-(a)  Place separate audited accounts in respect of each of its subsidiary on its website, if any and

(b)  Provide a copy of separate audited financial statements in respect of each of its subsidiary, to any shareholder of the Company





  • A holding Company can and does hold shares of subsidiary, but a subsidiary can’t hold shares in its holding company. Share allotment made to subsidiary is void.
  • This restriction applies even if shares are held by nominee of subsidiary Company and not by the subsidiary company itself.
  • However there are certain cases, subsidiary can be member of its holding Company:-
  • When subsidiary is a legal representative of deceased member of holding Company.
  • When subsidiary is concerned in shares as trustee.


  • Investment held before the Company became subsidiary can continue, but in that case, subsidiary has no voting right in holding Company.




  • The provisions relating to the compositions of the Board of Directors of the holding Company shall be made applicable to the composition of the Board of Directors of Subsidiary Companies.
  • At least one independent Director on the Board of Directors of the subsidiary company.
  • The Audit Committee of the Holding company shall also review the financial statements, in the particular the investments made by the subsidiary Company.
  • The minutes of the Board meetings of the subsidiary company shall be placed for review of the Board meeting of the holding Company.
  • The Board report of the holding Company should state that they have reviewed the affairs of the subsidiary company also.

♣ Whether a Company can be holding Company even if it does not hold 50% equity shares?

  • The definition of Subsidiary Company mentions ‘total share capital’. Hence, preference capital can’t be ignored. Thus, even if a company has less than 50% equity shares in another company, the other Company can be its holding company, if including preference share capital, the total holding is more than 50%.