Under the Companies Act, a company is considered a holding company in relation to one or more other companies if it exercises control over them. According to Section 2(46) of the Companies Act, 2013, a holding company is a company that has one or more subsidiary companies. It is defined as a parent entity that controls the composition of the Board of Directors of another company (subsidiary) or holds more than 50% of its voting power.
Under Section 2(87) of the Companies Act, 2013 , a subsidiary company is one where another entity (the holding company) controls the composition of its Board of Directors or holds more than half of its total voting power/share capital. This control can be exercised directly or through another subsidiary
Criteria for Control:
It controls the composition of the Board of Directors of the other company (the subsidiary).
It exercises or controls more than one-half of the total voting power of the subsidiary, either on its own or together with one or more of its other subsidiary companies.
Purpose: This structure is often used for tax benefits, risk management, or to manage diverse business units under a single parent entity.
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