SRM Limited (a listed company), a wholly owned subsidiary of Spice Limited (an another listed company) proposes to acquire 10,000 equity shares of Spice Limited from the secondary market (in demat form). Advise SRM Limit

Section 19 of the Companies Act, 2013 provides that no company shall, either by itself or through its nominees, hold any 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. First proviso to the said section states that, the above prohibition shall not apply to the following cases: 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 the holding company. Provided further that the subsidiary company referred to in the first proviso 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. In the light of the above provisions, SRM Ltd. cannot hold equity shares in Spice Ltd. and further, Spice Ltd. is advised to prohibit from making any allotment or transfer in favour of SRM Ltd. If such an allotment or transfer is done, it will be void.