Your company to be a member of its holding company ?

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Do you wish your company to be a member of its holding company ?

1. Note that a subsidiary company is prohibited from becoming a member of its own holding company.

2. Also note that if by in advertence, the subsidiary company has been allotted shares by its holding company, such allotment will be totally void.

3. If you want to make your subsidiary company a member or shareholder of its holding company, then do the following :

(a) Make your subsidiary company to hold shares in its holding company in trust for any other member or members. Shares can also be held by the subsidiary as a legal representative of a deceased member of a holding company.

(b) See that the holding company or any other subsidiary  of it does not have beneficial interest in the shares held in trust by your subsidiary company, except by way of security for the purpose of a transaction entered into in the ordinary course of a business.

4. Instead of adopting the procedure in Item No.3 above, you can also :

(a) Hold the shares of a particular company in the name of your own company which is not yet a subsidiary of that other company and become its member.

(b) After becoming a member of that company, make your company a subsidiary of that other company by applying the provisions of Section 2 (46) and 2 (87) of the 2013 act which define respectively a holding company and subsidiary company. These sections correspond to Section 4 in the 1956 Act.

(c)Do not exercise voting power in the meeting of the holding company.

5. In order to enjoy both the membership and the voting rights in your holding company, you can do the following :

(a) Hold the shares of any other company ( to become holding company afterwards) not in the name of your own company, but as a trustee of some other persons.

(b) See that the other company whose shares are held by company in trust or any other subsidiary of that company does not have beneficial interest under the trust.

(c) After becoming a member of that company, make your company a subsidiary of that other company (now becoming the holding company) by applying the provisions of Section 2 (46) and 2(87) of the 2013 act.

6. If your subsidiary company is, or becomes a legal representative of any deceased member of your holding company, then your company can become member of your holding company and also enjoy voting rights.

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