Corporate and Other LawsMCQQuestion 12517 of 300
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Under Section 19(1) of the Companies Act, 2013, a subsidiary company is prohibited from holding any shares in its holding company. Which of the following is a recognized statutory exception where a subsidiary MAY hold shares in its holding company?

Select Your Answer (Keyboard: A, B, C, D)
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Correct Answer

✅ Option A — Where the subsidiary company holds such shares as the legal representative of a deceased member of the holding company

All Options:

  • AWhere the subsidiary company holds such shares as the legal representative of a deceased member of the holding company ✓
  • BWhere the subsidiary company has excess surplus reserves exceeding ₹100 Crore
  • CWhere the board of directors of the holding company approves by unanimous resolution
  • DWhere the shares are purchased from secondary open market through a stock broker

Detailed Solution & Explanation

Correct Answer: Option **A** (Where the subsidiary company holds such shares as the legal representative of a deceased member of the holding company) **Statutory Provision (Section 19 - Subsidiary Company Not to Hold Shares in its Holding Company):** Section 19(1) proviso lists three exceptions: (a) where the subsidiary company holds such shares as the legal representative of a deceased member; (b) where the subsidiary holds shares as a trustee; or (c) where the subsidiary company was a shareholder even before it became a subsidiary company of the holding company. Therefore, Option A is the correct legal position under the ICAI curriculum.

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