XYZ Ltd. a public unlisted company engaged in business of transportation, is having three layers of subsidiary as on 31st March, 2016. The company secretary advises the Board of directors to reduce the layers of subsidia

The Companies (Restriction on number of layers) Rules, 2017 Restriction on number of layers for certain classes of holding companies Sub-Rule (4) of rule (2) Every company, other than a company referred to in sub-rule (2), existing on or before the commencement of these rules, which has number of layers of subsidiaries in excess of the layers specified in sub-rule (1): shall file, with the Registrar a return in Form CRL-1 disclosing the details specified therein, within a period of one hundred and fifty days from the date of publication of these rules in the Official Gazette; shall not, after the date of commencement of these rules, have any additional layer of subsidiaries over and above the layers existing on such date; and shall not, in case one or more layers are reduced by it subsequent to the commencement of these rules, have the number of layers beyond the number of layers it has after such reduction or maximum layers allowed in sub-rule (1), whichever is more. Conclusion: In this case, XYZ Ltd. is having three layers as on 31st March, 2016 which is before the commencement of these rules, hence the company need not to reduce its layers. Instead, the company need to file Form CRL-1 as discussed above. So, company secretary is not right in advising the company.