The document discusses some key differences in treatment of subsidiaries of Indian versus foreign companies under the new Companies Act of India. Specifically, while subsidiaries of Indian public companies are also considered public, subsidiaries of foreign companies can remain private. This allows foreign companies more flexibility in setting up subsidiaries in India without requirements for appointing key managerial personnel or undergoing secretarial audits. Experts note this makes India a more attractive destination for foreign companies.

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THOUGHT OF THE DAY
“You are never a loser until you quit trying”.
Law Updates :
 RBI/2014-15/46 DNBS (PD) CC No.397/03.02.001/2014-15 Master
Circular – Requirement for Obtaining Prior Approval of RBI in
Cases of Acquisition / Transfer of Control of NBFCs
 RBI/2014-15/50 DNBS (PD)CC.No.40/SCRC/26.03.001/2014-
2015-Change in or Take Over of the Management of the Business
of the Borrower by Securitisation Companies and Reconstruction
Companies (Reserve Bank) Guidelines, 2010.
 RBI/2014-15/55 DNBS (PD) CC No.381/03.02.001/2014-15 Master
Circular – “Non-Banking Financial (Non - Deposit Accepting or
Holding) Companies Prudential Norms (Reserve Bank) Directions,
2007”
 RBI/2014-2015/11 Master Circular No.7/2014-15-Master Circular
on Establishment of Liaison / Branch /Project Offices in India by
Foreign Entities.
 CBEC seeks adherence to judicial discipline in the matter of
refunds-The Central Board of Excise & Customs (“the CBEC”) has
issued Instruction F. No. 201/01/2014-CX.6 The CBEC has invited
attention to the order of the Hon’ble High Court of Gujarat (“the
HC”) in the case of E.I. Dupont India Pvt. Ltd. [2013- TIOL-1172-
HC-AHM-CX].
PROFESSIONALS INPUTS:
 In a major entertainment business deal, Reliance Capital today
announced the merger of its global film and media services business
with Prime Focus to create an entity with a combined turnover of
over Rs 1,800 crore.
MARKET WATCH:
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CS Rajiv Bajaj
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Date: 3rd July 2014

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COMPANIES ACT,2013
The new Companies Act has exacerbated the already existing disparity in the treatment of subsidiaries of Indian
public companies and overseas firms. While the subsidiary of an Indian public company is also deemed to be a
public company, Indian subsidiaries of foreign companies can remain as private companies.
Under the old Companies Act, an Indian subsidiary of foreign public company is not treated as a public
company only if the entire share capital of the subsidiary is held by foreign companies incorporated outside
India. There is no such exemption provision under the new Companies Act and as a result foreign firms can
freely set up subsidiaries as private companies.
The Ministry of Corporate Affairs (MCA) had recently clarified that Indian subsidiaries of foreign companies
can continue to remain as private companies. Further, MCA has said that foreign companies are entitled to
establish their Indian subsidiaries either as public companies or private companies.
A public company with a capital of Rs 10 crore must mandatorily appoint a chief executive officer or managing
director and one chief financial officer and one company secretary as its key managerial personnel (KMPs).
The same person cannot hold two positions at the same time. If the company is a private company, irrespective
the capital and size, this provision would not apply. Private companies need not appoint KMPs and have been
exempt from secretarial audit under the new Companies Act.
"It (the new provisions) would be advantageous for foreign companies. They (foreign firms) need not comply
with the rules on KMPs and secretarial audit,"