Holding And Subsidiary Company Regulations - A Complicated Matrix

1. Introduction

Section 4 of the Companies Act, 1956 (the Act) prescribes dual test and conceptually defines the Holding-Subsidiary company relationship. This is a special provision extending the provisions of the Act to intra-company relationships. Two significant factors which determine the relationships are control and ownership. The business conduct of such companies are regulated in certain respects and the effect of such regulations will result in treating another company as a Subsidiary of the Holding company. With the result, the provisions of the Act applicable to a public company will also apply to the subsidiary private company. However, the character of private remains unchanged.