Tire above defections, thaws indicate tan there is ilk such thing as a holding company as of itself by conshtuhon, and that there can be no holding
company except where there are one or mole subsidiaries. The usual form to create the holding and subsidiary -o7npany relationship is a substantial investment (more .'hungrily per r net i?? the equity share capital of another ccmpa:7U
Further, it may also be rioted that of shares' or power 10 appoint majority of directors -o. the following nature shall not he taken into con side Tattoo it while determhiillg the Telahons7lip of holding and subsidiary comp armies:
I. where the skates are held or the power is exercised by the company in a fiduciary capacity cog, is a tart step, or
2. where the shares are held or' the power is exe Testable by a lending company merely as security. for a transaction entered Alto in the ordinary course of the business; OT
INCORPORATION OF A COMPANY 55
still relevant in the case of a private company No-hit may become a subsidiary of a public catnap N by virtue of the latter company N being able to control the major’s composition of its }board of Directors without holding the controlling interest m its shares (see details under the deducting of - Subsidiary Company' discussed -earlier).
Amendment. Scrim 4 3A asaraendedbnies amendment) Act, 1988, provides that a private company Deli become a deemed public company automatically under the following four circlrnctances:
. 1 Section 43A sub-section (1) provides that company would be deemed to be a public company where 25 per cent or more of its paid-up share capital (whether preference or equity) is held by one or more public companies or private compiles which had become public emperies by Virtue of this Section (i.e., Sec. 43A); and would be subject to the same restrictions and limitations as are applicable to public companies, of course with certain exceptions However, in computing the above percentage, shares held by a ban company shall not be taken into account in the following two cases:
Cases. (a) where the shares are held as a trustee of some trust not being a case where shares are held as a trustee for the benefit of any body corporate; or
(b) where the shares are held as, or on behalf of, an executor or administrator of a deceased person to whom such shares belonged and It
shares have not been bequeathed by will to anybody corporate by the deceased 2. Section 43A sub-second (IA) provides that a private cotr.panyhsing an average -annual turnover of fen core rupees or r ore during the period of tlueeconsecutiveftnancialyears shall become public company, on the form the expire of a period of three months from the last day of the third financial year of the relevant penned' during which the pi i v ate company had the said average annual 'turnover'.