1. Definition under the Companies Act, 2013

• A subsidiary company is a company in which another company, known as the holding company, either:
  
  • Controls the composition of its Board of Directors, or
    
  • Holds more than 50% of its total share capital or voting power.
    
• When such a subsidiary is incorporated as a Public Limited Company, it is referred to as a Subsidiary Public Limited Company.
  
• This is governed by Section 2(87) of the Companies Act, 2013.
  

2. Key Characteristics

• It is registered as a public company, meaning it must have:
  
  • A minimum of 7 shareholders
    
  • At least 3 directors
    
  • Compliance with all applicable rules for public companies
    
• Even though it is a subsidiary, it retains its separate legal identity and corporate obligations.
  
• It may be listed or unlisted depending on whether its shares are traded on a stock exchange.
  

3. Ownership and Control

• The holding company can be either a private or public company, Indian or foreign.
  
• It usually owns more than 50% of the subsidiary’s equity shares, but control can also be through contractual rights or board control.
  
• The subsidiary may have other minority shareholders, but ultimate control lies with the parent.
  

4. Legal and Compliance Requirements

• A Subsidiary Public Limited Company must comply with:
  
  • All provisions applicable to public companies (e.g., AGM, board composition, audits, disclosures)
    
  • Filing consolidated financial statements with its holding company under Section 129(3)
    
  • Disclosures of related party transactions, inter-corporate loans, and investments
    
  • Maintenance of statutory registers, auditor appointments, and board evaluations
    
• If listed, it must also follow SEBI (LODR) Regulations, 2015.
  

5. Operational and Strategic Role

• Often used by large corporate groups to:
  
  • Manage distinct lines of business.
    
  • Comply with industry-specific regulations.
    
  • Facilitate foreign investments or joint ventures.
    
  • Limit liability exposure to specific business activities.
    
• Though controlled by the holding company, it may have independent operations, financial reporting, and management teams.