Understanding the Conversion Structure

• A subsidiary is a company in which another entity (the holding company) owns more than 50% of the total share capital or controls the composition of the board of directors.
  
• To convert a JV into a subsidiary, one partner (usually the lead or strategic partner) must acquire majority ownership in the JV.
  
• This may involve buying out the equity stake of the other partner(s), either partially or entirely.
  
• Post-conversion, the JV company operates as a controlled entity under the acquiring partner’s corporate group.
  
• The process must comply with corporate, tax, and competition laws in India.
  

Share Acquisition and Valuation Process

• The interested partner initiates the process by proposing to purchase additional shares to exceed 50% ownership.
  
• A professional valuation of the JV is conducted to determine fair market value and negotiate a purchase price.
  
• The share transfer or allotment is documented through Share Purchase Agreements (SPA) or Rights Issue/Preferential Allotment.
  
• If the JV is listed or involves foreign shareholders, SEBI and RBI guidelines may apply.
  
• The acquiring partner must file appropriate forms with the Registrar of Companies (RoC) and Income Tax Department.
  

Amending the JV Agreement and Corporate Structure

• The existing JV agreement must be amended or terminated to reflect the new shareholding and control arrangement.
  
• New Articles of Association (AoA) and Shareholders’ Agreement are adopted to define the governance of the subsidiary.
  
• The board composition, voting rights, and decision-making powers are updated to reflect the holding company’s control.
  
• Business operations, branding, and reporting lines may be aligned with the parent company’s policies.
  
• Any reserved rights or veto powers previously held by the outgoing partner are removed.
  

Regulatory Filings and Compliance

• The change in ownership and control must be reported to the Ministry of Corporate Affairs (MCA) through forms such as MGT-7, PAS-3, and DIR-12.
  
• If there is foreign investment, Form FC-TRS or Form FC-GPR must be filed with the Reserve Bank of India (RBI).
  
• The new subsidiary must update its GST, PAN, bank records, and other statutory registrations.
  
• Sector-specific approvals may be required in regulated industries such as telecom, defense, or finance.
  
• All corporate records must reflect the revised status as a subsidiary.
  

Post-Conversion Integration and Control

• The subsidiary is integrated into the parent company’s financial reporting, HR policies, compliance systems, and operational framework.
  
• The holding company assumes control over strategic decisions, funding, and expansion.
  
• The subsidiary must comply with consolidation requirements under Indian Accounting Standards (Ind AS).
  
• The acquiring company assumes responsibility for liabilities, pending obligations, and stakeholder communication.
  
• A clear communication plan is implemented for employees, clients, suppliers, and regulators regarding the change in control.