Permissibility Under Law

• Yes, a subsidiary can be acquired by another Indian company as per the provisions of the Companies Act, 2013, and relevant SEBI, FEMA, and Income Tax laws.
  
• The acquisition may be of 100% or partial shareholding, depending on the commercial objective.
  
• It can be executed through share purchase, amalgamation, merger, or a slump sale.
  
• The acquiring company can be a private limited, public limited, or listed entity.
  
• Sectoral restrictions or approvals may apply in regulated industries such as defense, banking, telecom, or insurance.
  

Modes of Acquisition

• Share Purchase: The acquiring company directly purchases equity shares of the subsidiary from its existing shareholders.
  
• Asset/Business Purchase: The acquirer buys specific assets or business undertakings instead of shares.
  
• Merger/Amalgamation: The subsidiary is merged into the acquirer or another company by following the NCLT-approved merger process.
  
• Takeover: In case of listed subsidiaries, acquisition must follow SEBI’s Takeover Code if thresholds are triggered.
  
• Joint Venture Acquisition: The subsidiary is acquired jointly with another partner or investor.
  

Board and Shareholder Approvals

• Approval of the Board of Directors of both the acquiring company and the subsidiary is mandatory.
  
• In most cases, a special resolution from the shareholders of the transferor and transferee companies is required.
  
• The acquisition agreement must include terms of payment, liabilities, employment transition, and legal representations.
  
• The transaction must align with the Articles of Association and any existing shareholder agreements.
  
• Independent valuation may be required to determine the share price or asset value.
  

Regulatory Filings and Compliance

• Post-acquisition, the change in shareholding must be reported to the Registrar of Companies (ROC) through Form MGT-7 and Form PAS-3.
  
• If the acquirer becomes the new holding company, it must be reflected in statutory registers and ROC filings.
  
• For foreign-owned subsidiaries, the acquisition must be reported to the RBI in Form FC-TRS within 60 days.
  
• Competition Commission of India (CCI) approval may be needed if turnover or asset thresholds are exceeded.
  
• Stamp duty is applicable on the transfer of shares or business assets as per state laws.
  

Tax and Legal Implications

• Share purchases may attract capital gains tax in the hands of the seller, based on the holding period.
  
• Transfer pricing compliance is required for group entities or foreign-controlled transactions.
  
• Indirect transfer provisions may apply if overseas transfer of Indian assets is involved.
  
• Any change in ownership must not violate contractual obligations, employment agreements, or government licenses.
  
• Legal due diligence is essential to identify hidden liabilities, pending litigations, and encumbrances.