The Companies Amendment Bill 2016 is set to deliver new thoughts and it would be essential for professionals to be ready to face it.
The major departure is happening in the concept of Holding Company. It is proposed to add the explanation in the definition to include Body Corporate as holding company. The provisions of the Companies Act, 1956 were recognizing the body corporates as holding companies for Indian subsidiaries. The said identification was more or less remained in the books since hardly any limits or disclosures or compliances under the old Act were based on the relationship of holding and subsidiary. Initially under CA 2013 the recognition of body corporate was not included for the purpose of identification of Holding Company under the Act. Rightfully there was never a need to brought body corporates under the Act as Holding Companies and regulate them. Additionally all subsidiaries will automatically be out of the definition of Small and need to observe more compliances. Careful examination of this amendment is required before its implementation. Based on holding and relationships between companies and bodies corporates, the provisions of consolidation and RPT would also apply.
The definition of Subsidiary Company is also proposed to be amended by replacing the words voting power to share capital. This change is likely to make LLP’s subsidiary of Indian Company on investment basis. This is going to be a major change in group structuring pattern.
The proposals brought under the grab of correcting the small anomaly has actually far reaching impacts. The business and professionals will need to realign the present strategies. It has to additionally check whether it’s holding body corporate is Public Company under the Act or not. If so then ipso facto the Indian company will also be treated as a public company under the proviso to definition of public company (section 2(71)). Stricter compliances are then need to be followed. Body corporate definition is inclusive definition and Indian Body Corporates holding voting power or controlling composition will also become Holding companies. There is a need to examine the impact of holding body corporate (not being a private company under the act) on the status of private subsidiary company by virtue of definition of Public Company.
Disclaimer: This document is a copyright of Makarand Lele. The entire contents of this document have been developed on the basis of relevant statutory provisions. Though the author has made utmost efforts to provide authentic information however, the author expressly disclaim all and any liability to any person who has read this document, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this document. This is only a knowledge sharing initiative and author do not intend to solicit any business or profession
Above Post is subject to Disclaimer