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February 2014

Clarification with regard to Holding of shares or exercising power in a fiduciary capacity – Holding and Subsidiary relationship u/s. 2(87) of Companies Act 2013

By Sejal Vasa, Company Secretary
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The Ministry of Company Affairs has clarified vide Circular No. 20/2013 dated 27th December that it has received a number of representations consequent upon notifying section 2(87) of the Companies Act, 2013 which defines “subsidiary company” or”subsidiary”. The stakeholders have requested this Ministry to clarify whether shares heldor power exercisable by a company in a ‘fiduciary capacity’ will be excluded while determining if a particular company is a subsidiary of another company. The stakeholders have further pointed out that in terms of section 4(3) of the Companies Act, 1956, suchshares or powers were excluded from the purview of holding-subsidiary relationship. The Ministry has thus clarified that the shares held by the company or power exercisable by it in another company in a ‘fiduciary capacity’ shall not be counted for the purpose of determining the holding-subsidiary relationship in terms of the provision of section 2(87) of the Companies Act, 2013.

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