The Ministry of Corporate Affairs (MCA) has flagged multiple instances of improper shareholding structures in subsidiaries, raising concerns about non-compliance with the provisions of the Companies Act, 2013. The ministry’s review highlighted that several companies, particularly foreign-owned and multi-layered group entities, had failed to maintain the mandated majority ownership or board control necessary to classify a business unit as a legitimate subsidiary. These irregularities have prompted a call for stricter monitoring and accurate disclosures in corporate filings.

According to officials, discrepancies were observed in cases where nominee shareholders, cross-holdings, or indirect control mechanisms were used to create artificial subsidiary arrangements. The ministry emphasized that such structures not only misrepresent the beneficial ownership but also potentially mask related-party transactions and financial liabilities. As part of the compliance drive, companies have been instructed to furnish revised shareholding details, board resolutions, and beneficial ownership declarations under stricter scrutiny.

The MCA has warned that failure to rectify shareholding anomalies may result in penal action, including fines and restrictions on future corporate restructuring. Industry experts believe this enforcement action reflects the government’s broader effort to strengthen corporate transparency, prevent misuse of the subsidiary model for regulatory arbitrage, and align Indian corporate practices with global governance standards. Companies are now advised to conduct an internal review of their subsidiary arrangements to ensure full compliance with the clarified shareholding norms.