ABC Ltd. holds 75% equity share capital of DEF Ltd. and controls composition of Board of Directors of DEF Ltd. ABC Ltd. goes for public issue for raising further share capital. Board of Directors of ABC Ltd. allot 10% of

In accordance with the provisions of the Companies Act, 2013, as contained in Section 19(1), a subsidiary company shall not either by itself or through its nominees hold shares in its holding company and no holding company shall allot or transfer its shares to any of its subsidiary companies and any such allotment or transfer of shares of a company to its subsidiary company shall be void. Therefore, ABC Limited cannot allot 10% shares of public issue to DEF Limited, in view of the above provisions. Allotment of shares to DEF Limited shall be void. Further, in the following circumstances, where a subsidiary can hold the shares of its holding company: Where the subsidiary company holds such shares as the legal representative of a deceased member of the holding company; or Where the subsidiary company holds such shares as a trustee; or Where the subsidiary company is a shareholder even before it became a subsidiary company of its holding company. The subsidiary company, however, as referred above shall have a right to vote at a meeting of the holding company only in respect of the shares held by it as a legal representative or as a trustee.