“A company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purposes of this Act even where such subsidiary company continues to be a private company in its articles”;

Check points:

i. Subsidiary of a Public Company

ii. Continue with the restrictions mentioned in clause 68 of section 2

As per provision of ‘Deemed Public Company’ if a private Limited Company is subsidiary of Public Company will be considered as Deemed Public Company.

Date of becoming a deemed Limited Company

The private company becomes deemed limited immediately upon, became subsidiary of public Company.

In 2006, in case of Hillcrest Realty Sdn. Bhd v.Hotel Queen Road (P.) Ltd.2, the Company Law Board,Delhi Bench held at para. 36 that “all the provisions in the Articles to maintain the basic characteristics of a private company in terms of section 3(1)(iii) will continue to govern the affairs of the company even though it is a subsidiary of a public company”. It was held by the Delhi CLB Bench that the basic characteristics of a private company in terms of section 3(1)(iii) do not get altered just because it is a subsidiary of a public company in view of fiction in terms of section 3(1)(iv)(c) that it is a public company. It was further held by the Bench that it may be a public company in terms of other provisions of the Act but not with reference to its basic characteristics.

This Private Limited Company required to Comply will the many new provisions which were not applicable on it’s up to the time it was purely private limited Company. Some examples are given below:

Restrictions! Deemed Public:-

All the provisions of Public Company applicable on deemed public Company except following below given restriction as mentioned in Article of Association of Company:

i. Restricts the right to Transfer its shares;

ii. Limits the number of its Members to Two Hundred:

iii. Prohibits any Invitation to The Public to subscribe for any securities of the company;

Along with provisions applicable on public Company it has to comply with the restriction mentioned above.

Note:

It is a well accepted principle that ‘what is not there in the law cannot be imported into the law’. Therefore, a private company which becomes a public company by virtue of being a subsidiary of a public company:

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