Section 19: Subsidiary company not to hold shares in its holding company
This section prevents a subsidiary company from holding shares in its holding company, with specific exceptions and rules for companies without a share capital.
The section, clause by clause
What the section says
In plain terms
(1)No company shall, either by itself or through its nominees, hold any shares in its holding company and no holding company shall allot or transfer its shares to any of its subsidiary companies and any such allotment or transfer of shares of a company to its subsidiary company shall be void:
A company cannot hold shares in its holding company, either directly or through nominees, and a holding company cannot allot or transfer its shares to a subsidiary company, with certain exceptions applying if the subsidiary holds shares as a legal representative, trustee, or was a shareholder before becoming a subsidiary.
provisoProvided that nothing in this sub-section shall apply to a case—
(1)(a)where the subsidiary company holds such shares as the legal representative of a deceased member of the holding company; or
(1)(b)where the subsidiary company holds such shares as a trustee; or
(1)(c)where the subsidiary company is a shareholder even before it became a subsidiary company of the holding company:
provisoProvided further that the subsidiary company referred to in the preceding proviso shall have a right to vote at a meeting of the holding company only in respect of the shares held by it as a legal representative or as a trustee, as referred to in clause (a) or clause (b) of the said proviso.
(2)The reference in this section to the shares of a holding company which is a company limited by guarantee or an unlimited company, not having a share capital, shall be construed as a reference to the interest of its members, whatever be the form of interest.
If a holding company is limited by guarantee or unlimited with no share capital, references to its shares mean the members' interests, regardless of the form of those interests.
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
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Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.