close
Share with your friends

First Notes - 14 July 2017

First Notes - 14 July 2017

MCA proposes to notify the provisions relating to restriction on layers of subsidiaries under the Companies Act, 2013

1000

Also on home.kpmg

Background

The provisions (proviso to Section 2(87) and 186(1) of the Companies Act, 2013 (2013 Act)) are aimed at monitoring misuse of multiple layers of subsidiaries for diversion of funds/siphoning off funds and ensuring minority investor protection. Currently, proviso to Section 2(87) is not notified but Section 186(1) is currently applicable to companies. 

New development

The Ministry of Corporate Affairs (MCA) has pointed out that it has been receiving reports that certain companies could create shell companies for diversion of funds or money laundering. Therefore, MCA decided to operationalise the provisions relating to the restriction on number
of layers for holding companies (Section 2(87)) and the requirements of Section 186(1) regarding the number of layers of investment companies although the Companies (Amendment) Bill, 2016 proposes to remove the restrictions in these two sections.

Accordingly, MCA through a notice (no.3/3/2017-CL-I) dated 28 June 2017 proposed the following:      

  • Notification of the proviso to Section 2(87) of the 2013 Act
  • Insertion of new sub-rule 5 ‘Restriction on number of layers for certain holding companies’ to the Companie (Specification of Definitions Details) Rules, 2014. 

Comments to the proposals could be submitted up to 20 July 2017.

This issue of First Notes provide an overview of the MCA proposals.

To access the text of the MCA’s notice, please click here. 

© 2020 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

KPMG (Registered) (a partnership firm with Registration No. BA- 62445) converted into KPMG Assurance and Consulting Services LLP (a Limited Liability partnership firm) with LLP Registration No. AAT-0367 with effect from July 23, 2020.

For more detail about the structure of the KPMG global organization please visit https://home.kpmg/governance.

Connect with us

 

Want to do business with KPMG?

 

loading image Request for proposal