Definition Of Subsidiary

Companies Act defines a subsidiary company as one:

(a) in which the investor company

(i) controls the composition of the board of directors of the investee company;

(ii) controls more than one half of the voting power of the investee company; or

(iii) holds more than one half of the issued shared capital ( excluding preference shares); or

(b) which is a subsidiary of a subsidiary of the investor company.

Illustration:

The investor company is the holding company of the investee company if the investee company is its subsidiary. For example H holds more than 50% of the equity shares of S1,S2,S3. Therefore H, S1, S2 and S3 form a group, with H being the holding company and the other companies being subsidiaries of H.