Defination
1. Company [Section 2(20)] :- Means a company incorporated under this act or under any previous company law.
2. Foreign Company [Section 2(42)] :- Means a compan or body corporate incorporated outside India which,
(a) has a place of business in India whether by itself or through an agent, physically or through electronic mode; and
(b) conducts any business activity in India in any other manner.
Related Question:- Mike Limited company incorporated in India having Liaison office at Singapore. Explain in detail meaning of Foreign Company and analysis on whether Mike Limited would be called as Foreign Company as it established a Liaison office at Singapore as per the provision of The Companies Act, 2013??
Ans:- Foreign Company [Section 2(42)] :- Means a compan or body corporate incorporated outside India which,
(a) has a place of business in India whether by itself or through an agent, physically or through electronic mode; and
(b) conducts any business activity in India in any other manner.
Company [Section 2(20)] :- Means a company incorporated under this act or under any previous company law.
In the instance case mike limited incorporatyed in india having liasion office at Singapore.
In the light of the above provision and facts of the case we conclude that Mike limited cannot be called as foreign company because the basic condition to be called as foreign company is that the company must be incorporated outside India. In the present case Mike limited is incorporated in India. Therefore, mike limited can be called as company but cannot be called as foreign company.
Defination:-
Private Company [Section2(68)]:- Means a company having a minimum paid-up share capital as may be prescribed, and which by its articles,
(a) restrict the right to transfer its share;
(b) except in case of One Person Company, limits the number of its members of two hundred:
provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member;
Provided further that--
(i) persons who are in the employment of the company and
(ii persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be memners after the employment ceased, shall not be included in the number of members; and
(c) Prohibits any invitation to the public to subscribe for any securities of the company.
Related Question for understanding:
1. Flora Fauna limited was registerd as a public company, there are 230 members in the company as noted below;
Directors and their relatives | 190 |
Employees | 15 |
Ex-Employees (shares were allotted when they were employees | 10 |
5 couples holding shares jointly in the name of husband and wife(5*2) | 10 |
Others | 5 |
The Board of Directors of the company propose to convert it into a private company. Also advise whether reduction in the number of member is necessary.
Answer:- In the instant case. Flora Fauna Limited may be converted it into a private company only if the total members of the company are limited to 200.
Total no. of members
Directors and their relatives | 190 |
5 couples(5*) | 5 |
Others | 5 |
Total | 200 |
Therfore, there is no need for reduction in the no. of members since existing numbers of members are 200 which does not exceed maximum limit of 200.
Defination:-
1. Holding and Subsidiary company:-
Holding company [section 2(46)] :- means a company which such companies has one or more subsidiary company.
Subsidiary Company [section2(87)] :- means a company in which the holding company--
(i) controls the composition of the Board of Directors; or
(ii) exercise or controls more than one-half of the total voting power either at its own or together with one or more of its subsidiary companies.
2. Status of private company, which is subsidiary to public company [section 2(71)] :- A private company, which is subsidiary of a public company shall be deemed to be public company for the purpose of the Act, even where such subsidiary company continues to be a private company in its articles.
3. Associate company [section 2(6)] :- In relation to another company, means a company in which that other company has a significant influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company.
Explanation -- for the purpose of this clause--
(a) "Significant influence" means control of at least twenty percent of total voting power' or control of or participation in business decisions under an agreement;
(b) "Joint venture" means a jont arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.
"Total Share Capital", means the aggregate of the :-
(a) paid up equity share capital; and
(b) convertible preference share capital
Related Question for understanding:
Question 1: BC Private Limited and its subsidiary KL private limited are holding 90,000 and 70.000 shares respectively in PỌ Private Limited, The paid-up share capital of PQ Private Limited 30 Lakhs (3 Lakhs equity shares of10 each fully paid). Analyse with reference to proVisions ot the Companies Act, 2013 whether PỌ Private Limited is a subsidiary of BC Private Limited. What would be your answer if KL Private Limited is holding L.60,000 shares in PO Private Limited and no shares are held by BC Private Limited in PO Private Limited?
Answer: Provision same as above given under section 2(87)
In the instant case, as BC private limited together with its subsidiary KL private limited holding more than one-half of the total paid up share capital (voting power) in PQ private limited i.e. 90000 equity shares are held by BC private limited plus 70000 equity shares are held by KL private limited respectively in PQ private limited amounting to l60000 equity share out of total equity shares of 300000.
In the light of the above provision and facts of the case:
1. PQ private limited is subsidiary of BC private limited.
2. In the second case also, the answer would be the same as above, i.e., PQ private limited is subsidiary of BC private limited irrespective of the fact that no shares are held by BC Private Limited in PQ Private Limited.
Question 2 : The paid-up capital of Ram Private Limited is Rs. 10 Crores in the form of 7.00,000 Equity Shares of Rs. 100 each and 3.00.000 Preference Shares of Rs. 100 each. Lakhan Private Limited is holding 3,00,000 Equity Shares and 3,00,000 Preference Shares in Ram Private |Limited. State with reason, Whether Ram Private Limited is subsidiary of Lakhan Private Limited?
Answer: Provision same as above given under section 2(87)
It is to be noted that Preference share capital will also be considered if preference shareholders have same voting rights as cquity shareholders. As in the given problem it is not clear that whether Preference Shares are having voting rights or not, it can be taken that there is no voting right with these shares. On the basis of provisions of Section 2(87) and facts of the given problem, Lakhan Private Limited is holding 3,00,000 Equity |Shares of total equity paid up share capital of Ram Private Limited.
Therefore, as Lakhan Private Limited does not exercises or controls more than one-half of the total voting power in Ram Private Limited, Ram Private Limited is not subsidiary of Lakhan Private Limited.
Question 3: ABC Limited has allotted Swifts with voting rights to XYZ Limited worth Rs. 15 Crores and issued Non-Convertible Debentures worth Rs. 40 Crores during the Financial Year 2019-20. After that total Paid-up Equity Share Capital of the company is Rs. 100 Crores and Non-Convertible Debentures Stands at Rs. 120 Crores. Define the Meaning ofAssociate Company and comment on whether ABC Limited and XYZ Limited would be called Associate Company as per provisions of the Companies Act, 2013?
Answer: Provision - Section 2(6) as given above.
In the light of the above provision and facts of the case, as XYZ Ltd. hold 15 crore equity shares with voting right in total of 100 crore paid up equity of ABC Ltd. which is only 15 percent and holding of non-convertible debenture of Rs. 40 crores in ABC Ltd. will not be taken into account for observing the relationship of associate company.
Therefore, ABC Limited and XYZ Limited cannot be called Associate Company as per provisions of the Companies Act, 2013.
Question 4 : Manicar Limited has allotted equity shares with voting rights to Nanicar Limited worth Rs. 10 Crores and issued Non-Convertible Debentures worth Rs.30 Crores during the Financial Year 2017-18. After that total Paid-up Equity Share Capital of the company is Rs. 100 Crores and Non-Convertible Debentures stands at Rs. 150 Crores. Define the Meaning of Associate Company and comment on whether Manicar Limited and Nanicar Limited would be called Associate Company as per the provisions of the Companies Act. 2013?
Answer: Provision- Section 2(6) as given above
In the given case, as Manicar Ltd. has allotted equity shares with voting rights to Nanicar Limited of Rs. 10 crores, which is less than requisite control of 20% of total share capital (i.e. 100 crore) to have a significant influence of Nanicar Ltd. Since the said requirement is not complied therefore Manicar Ltd, and Nanicar Ltd. are not associate companies as per the Companies Act, 2013.-
Further holding/allotment of non-convertible debentures has no relevance for ascertaining significant influence. Hence the issue of non-convertible debentures will not make both the companies Associate Company.
Government Company |Section 2(45)
Question 1:- SK Infrastructure Limited has a paid-up share capital divided into 6,00,000 equity shares ofINR Ouestion 4 100 cach 2,00,000 equity shares of the company are held by Central Government and 1.20.000 equity shares are held by Government of Maharashtra Explain with reference to relevant provisions of the Companies Act, 2013, whether SK Infrastructure Limited can be treated as Government Company.
Answer: Government company [Section 2(45)): Government Company means any company in which not less than 51% of the paid-up share capital is held by-
(i) the Central Government, or
(ii) by any State Government or Governments, or
(iii) partly by the Central Government and partly by one or more State Governments. and the section includes a company which is a subsidiary company of such a Government company.
Explanation: For the purposes of tlhis clause, the”paid up share capital”shall be construed as “total voting power,”where shares with differential voting rights have been issued.
In the present case, SK Infrastructure Limited shall be treated as a Government Company because the Central Government and the Government of Maharashtra both are holding 53.33% equity shares of SK Infrastructure Limited (3.20.000/6.00.000× 100 = 53.33%) which is more than 51% of the paid-up share capital SK Infrastructure Limited.
Question 2: Narendra Motors Limited is a government company. Shah Auto Private Limited is a private company having share capital of ten crores in the form of ten lacs shares of Rs. I00 each. Narendra Motors Limited is holding five lacs five thousand shares in Shah Auto Private Limited. Shah Auto Private Limited claimed the status of Government Company. Advise as legal advisor, whether Shah Auto Private Limited is government company under the provisions of Companies Act, 2013?
Answer: Provision– Section 2(45) & Section 2(87) as given above By virtue of provisions of Section 2(87) of Companies Act, 2013, Shah Auto Private Limited is a subsidiary company of Narendra Motors Limited because Narendra Motors Limited is holding more than one-half of the total voting power in Shah Auto Private Limited.
Further as per Section 2(45), a subsidiary company of Government Company is also termed as Government Company. Hence, Shah Auto Private Limited being subsidiary of Narendra Motors Limited will also be considered as Government Company.
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