PROCEDURE FOR INCORPORATION OF A COMPANY AS SUBSIDIARY OF AN EXISTING COMPANY

(a) that other controls the composition of its Board of directors; or (b) that other: (i) where the first-mentioned company exercises or controls more than half of the total voting power of such company

a company shall be deemed to be a subsidiary of another company if, but only if, (a) that other controls the composition of its Board of directors; or (b) that other: (i) where the first-mentioned company exercises or controls more than half of the total voting power of such company (ii) where the first-mentioned company holds more than half in nominal value of its equity share capital; or (c) that first-mentioned company is a subsidiary of any company which is that other’s subsidiary. As per provisions of the Act, in order to make the proposed company, CD Ltd., a subsidiary of the existing company, AB Ltd., AB Ltd. must control the composition of the Board of Directors of CD Ltd. or it must exercise or control more than half of the total voting power in CD Ltd. or it must hold more than half of nominal value of the equity share capital of CD Ltd. In other words, the articles of association of CD Ltd. must contain the following provisions: – AB Ltd. shall have the power to appoint, remove or replace majority of the directors of CD Ltd. or – AB Ltd. shall hold majority of the shares, having voting rights, in CD Ltd. and the aforementioned provisions in the articles of association of CD Ltd. shall not be alterable, as long as the majority of shares are so held. Keeping the above provisions in view, CD Limited shall become a subsidiary of AB Ltd. by a legal fiction and no separate application for registration of the subsidiary is required. Thanks