ABC Limited has allotted equity shares with voting rights to XYZ Limited worth ` 15 Crores during the Financial Year 2023-24. After that the total Paid-up Equity Share Capital of ABC Limited is ` 100 Crores. Define the Meaning of Associate Company and comment on whether ABC Limited and XYZ Limited would be called Associate Company as per the provisions of the Companies Act, 2013? OR ABC Limited has allotted equity shares with voting rights to XYZ Limited worth ` 15 crores and convertible preference shares worth ` 10 crores during the financial year 2022-23. After that the total share capital of the company is ` 100 crores. Comment on whether XYZ Limited would be called an Associate Company as per the provisions of the Companies Act, 2013? Also define an Associate Company. OR ABC Limited has allotted equity shares with voting rights to XYZ Limited worth ` 15 Crores and issued Non-Convertible Debentures worth ` 40 Crores during the Financial Year 2019-20. After that total Paid-up Equity Share Capital of the company is ` 100 Crores and Non-Convertible Debentures stands at ` 120 Crores. Define the Meaning of Associate Company and comment on whether ABC Limited and XYZ Limited would be called Associate Company as per the provisions of the Companies Act, 2013? OR Manicar Limited has allotted equity shares with voting rights to Nanicar Limited worth ` 10 Crores and issued Non-Convertible Debentures worth ` 30 Crores during the Financial Year 2017-18. After that total Paid-up Equity Share Capital of the company is ` 100 Crores and Non-Convertible Debentures stands at ` 150 Crores. Define the Meaning of Associate Company and comment on whether Manicar Limited and Nanicar Limited would be called Associate Company as per the provisions of the Companies Act, 2013? OR The paid-up equity share capital of ACD Ltd. is ` 80 crores & preference share capital of ` 20 crores. B Ltd. holds equity shares in ACD Ltd. worth ` 15 crores and preference shares worth ` 10 crores. Can B Ltd. be considered as an Associate Company of ACD Ltd.?

As per Section 2(6) of the Companies Act, 2013, an Associate Company in relation to another company, means a company in which that other company has a significant influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company. The term “significant influence” means control of at least 20% of total voting power, or control of or participation in business decisions under an agreement. In the given case, ABC Ltd. has allotted equity shares with voting rights to XYZ Limited of ` 15 crore, which is less than requisite control of 20% of total share capital (i.e. ` 100 crore) to have a significant influence of XYZ Ltd. Since the said requirement is not complied therefore ABC Ltd. and XYZ Ltd. are not associate companies as per the Companies Act, 2013. OR The term “joint venture” means a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. In the instant case, ABC Limited has allotted equity shares with voting rights to XYZ Limited worth ` 15 crore and convertible preference shares worth `10 crore during the financial year 2022-23 out of the total share capital of ABC Limited of ` 100 crore. Since XYZ Limited is holding only 15% significant influence (` 15 crore equity shares with voting rights) in ABC Limited, which is less than twenty per cent, XYZ Limited is not an Associate company of ABC Limited. Important Note: It can be assumed that the convertible preference shareholders are having voting rights and due to this, XYZ Limited is holding overall 25% paid up share capital in ABC Limited (with voting rights). Hence, XYZ limited is having significant control over ABC Limited and therefore XYZ is an Associate company of ABC Limited. OR The term “Total Share Capital”, means the aggregate of the – a) Paid-up equity share capital; and b) Convertible preference share capital. In the given case, as ABC Ltd. has allotted equity shares with voting rights to XYZ Limited of ` 15 crore, which is less than requisite control of 20% of total share capital (i.e. 100 crore) to have a significant influence of XYZ Ltd. Since the said requirement is not complied, therefore ABC Ltd. and XYZ Ltd. are not associate companies as per the Companies Act, 2013. OR In the given case, as Manicar Ltd. has allotted equity shares with voting rights to Nanicar Limited of Rs. 10 crores, which is less than requisite control of 20% of total share capital (i.e. 100 crore) to have a significant influence of Nanicar Ltd. Since the said requirement is not complied, therefore Manicar Ltd. and Nanicar Ltd. are not associate companies as per the Companies Act, 2013. Further holding/allotment of non-convertible debentures has no relevance for ascertaining significant influence. Hence the issue of non-convertible debentures will not make both the companies Associate Company. OR In the given case, the paid up share capital of ACD Ltd. is ` 80 crores. B Ltd. holds equity share capital of ` 15 crore in ACD Ltd. i.e. less than 20% significant influence. Therefore ACD Ltd. cannot be considered as an Associate Company of B Ltd. Holding/allotment of non-convertible debentures has no relevance for ascertaining significant influence.