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Company Structuring – How many subsidiaries can you have?

The Ministry of Corporate Affairs, with effect from September 20, 2017, restricted companies from having more than two layers of subsidiaries. This restriction will apply across the board to all the companies, whether private or public, listed or unlisted.


Exempted Companies


The following companies are exempted from this restriction:

  1. Banking companies as defined in clause (c) of section 5 of Banking Regulation Act, 1949;

  2. Systematically important NBFCs registered with the Reserve Bank of India;

  3. Insurance companies; and

  4. Government companies under the Companies Act, 2013.

Compliance Requirements


All companies (apart from the exempted companies) that currently have more than 2 layers of subsidiaries will have to disclose details of the subsidiaries by February 19, 2018.


Penalty for Contravention


The penalty for contravening the above restriction is fine which may extend upto INR 10,000/- with an additional INR 1,000/- every day after the first during which such contravention continues. The penalty can be levied on the Company and every officer of the company who is in default.

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