Interesting Question!!! - LLP can be a subsidiary of a Company!!

[CS. Sheikhar P Naik]

Dear Professionals,

As per definition of "Subsidiary Company or Subsidiary" provided in section 2 (87) of the Companies act 2013, Company includes "Body Corporate" (refer Explanation part provided in the said Section). Further, LLP falls under the definition of "Body Corporate". 

In such case, can a LLP become a subsidiary of Company?     

I am looking for your views/ comments in this regard. 

 

Thanks and Regards

Sheikhar P Naik

[rafi shariff]

Dear Sheikhar,

Yes, if a company holds more than half of total capital or controls composition of BOD of a LLP, such a LLP would be a subsidiary of that company.

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Regards and thanks,
CS Rafeeulla Shariff
Mobile No. +91 7259700201

[CS. Sheikhar P Naik]

Dear Shariff,

Thanks for reply...

But as per Section 2 (87) read with Cos. Specification of Definitions Details) Rules 2014, Total Share Capital means (i) paidup equity share capital and (ii) convertible preference share capital. 

In such case, shall we consider investment (Capital contribution) made in an LLP as Share Capital?.   

    

 

Thanks and Regards

CS. Sheikhar P Naik
Company Secretary
Siderforgerossi India Pvt Ltd.
82-84,  Mysore-Belagola Indl. Area
5^th Mile, KRS Road, Metagalli Post
Mysore - 570 016 – Karnataka INDIA
Mobile: +91-9008798930
e-mail: sheik...@siderforgerossiindia.com

 
Holding Company
Siderforgerossi Group S.P.A.
Via Cartiera di mezzo, 2
36011 Arsiero (VI)

ITALY

[rafi shariff]

Dear Sheikhar,

Yes. Contribution in LLP is nothing but share capital in Company. You may consider the same.

Thanks.

[nidhi goel]

Not agreed with the views.

There is a separate act for LLP and for company. Though its a gray area, but the contribution in LLP can not be considered as Share Capital. 

The specific terms given in LLP Act are Contribution and Partners not as Share Capital and Directors or Board.

By considering the LLP as subsidiary company the Companies Act, will automatically applies, which is not a right interpretation, as for LLP, specifically LLP Act is given.

Other views are solicited.

Thanks & Regards

Nidhi Goel

Company Secretary.

[Varun Kapoor]

Dear Mr. Sheikhar,

An LLP can hold shares but it cannot be regarded as Subsidiary even if it holds more than half, as only a Company can become Subsidiary of a Company.

Though, there is no specific law on this, but LLP cannot be considered as Company as it has separate Act.

Thanks and Regards,

Varun Kapoor

B.Com ACS, LL.B(Pursuing)

Mobile: +91 98-99-11-0705 Email:csvaru...@gmail.com

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[Naveen Kumar]

Mr Rafi and Sheikhar ji, where it is mention that LLP considered as body corporate , only company includes the body corporate but does not include the LLP 

and subsidiary company or subsidiary means company in relation to any other company means company in which the holding company......... not the LLP or other....    

and second thing capital contribution and share capital both r different thing...

Regards

Naveen Kumar

[CS. Sheikhar P Naik]

Dear Members,

Thanks for your valuable suggestion.

KA: Mr. Naveen

LLP is a Body Corporate. 

Please refer section 3(1) of LLP Act 2008 and Section 2 (11) of CA 2013. 

And definition of "Company" in section 2 (87) of CA 2013 is inclusive (Explanation Part). "Company" includes "Body Corporate" (Body Corporate defined in Sec. 2 (11) of CA 2013).

 

Further to my query-

Generally it is wrong interpretation to consider LLP as subsidiary of Company by virtue of investment made (more than half of capital) by the Company in LLP. But after reading FAQ issued by ICAI & Accounting Standard Board (ASB) for consolidation of Financial Statement, I am confused (FAQ is attached for your reference).   

Kindly suggest.

Thanks and Regards

CS. Sheikhar P Naik
Company Secretary

[Ganesan Ramakrishnan]

Icai guideline refers for consolidation for which 

Entity is the criteria  and ‎not subsidiary

Gr

Sent from my BlackBerry 10 smartphone.

From: CS. Sheikhar P Naik Sent: Wednesday 20 July 2016 1:37 PM To: csmy...@googlegroups.com Reply To: csmy...@googlegroups.com Subject: Re: [CSMysore] Interesting Question!!! - LLP can be a subsidiary of a Company!!

[nidhi goel]

​That FAQ deals with consolidation and talks about terms of entity and enterprise, which includes an LLP too. ​

[Chandravijay Shah & Co.]

The FAQ published by The Institute of Chartered Accountants of India and referred to in the Trailing E-mails clarifies on the issue in unambiguous terms that an LLP or a Partnership Firm also need to be consolidated by the H Company if the former is a Subsidiary, even though they are not Companies.

 

From: csmy...@googlegroups.com [mailto:csmy...@googlegroups.com] On Behalf Of nidhi goel
Sent: 20 July, 2016 2:15 PM
To: csmysore
Subject: Re: [CSMysore] Interesting Question!!! - LLP can be a subsidiary of a Company!!

 

​

[Naveen Kumar]

Mr. Sheikhar, u need to read once again the def. of Section 2 (11) of CA 2013 becoz nowhere mention in body corporate def. word LLP....

(11) “body corporate” or “corporation” includes a company incorporated outside India, but does not include—

(i) a co-operative society registered under any law relating to co-operative societies; and

(ii) any other body corporate (not being a company as defined in this Act), which the Central Government may, by notification, specify in this behalf;

and reference attached by u talks about the consolidation of accounts of subsidiary and also about the entity and enterprises....   

[CS. Sheikhar P Naik]

Mr. Naveen,

LLP Act, 2008 itself says, LLP is a Body Corporate. Please refer. And section 2 (11) of CA 2013 is inclusive definition. Other members views are solicited in this regard.


Further, I am highlighting consolidation of accounts also because:

we are assuming that LLP cannot be subsidiary of a company. But as per referred FAQ, LLP or a Partnership Firm also need to be consolidated by the Company if the former is a subsidiary.  

In such case Entity or Enterprises i.e., LLP or Partnership Firm shall be either Subsidiary or associate or joint venture company because as per Section 129 of CA 2013 consolidation shall be done for subsidiary, associate company or joint venture. 

Thanks and Regards

CS. Sheikhar P Naik

[Naveen Kumar]

Mr. Sheikhar u reading the def. as per the LLP act but we are talking about the def. as per sec. 2(11) Com act 2013 it does not includes the LLP and LLP can not be subsidiary of the company........ 

and consolidation of accounts is something different.....here we r talking about the LLP  which can't be subsidiary of the company..   

[CS. Sheikhar P Naik]

Dear Mr. Naveen,

As per your mail LLP is not "Body Corporate" as defined under section 2 (11) of CA 2013.

If it is not " Body Corporate", then in which definition it comes?

If it is not " Body Corporate", most of the sections /provisions in the Companies Act 2013 shall not apply to LLP.

Example:
(i) "Interested Director"
(ii) Related Party?
(iii) section 185, 186 or 186 which are particularly linked with the definition of "Body Corporate" and so on...

Looking for your view in this regard.
 

Thanks and Regards

CS. Sheikhar P Naik
Company Secretary
Siderforgerossi India Pvt Ltd.
82-84,  Mysore-Belagola Indl. Area
5^th Mile, KRS Road, Metagalli Post
Mysore - 570 016 – Karnataka INDIA
Mobile: +91-9008798930
e-mail: sheik...@siderforgerossiindia.com

 
Holding Company
Siderforgerossi Group S.P.A.
Via Cartiera di mezzo, 2
36011 Arsiero (VI)

ITALY