Q.Under what circumstances can a subsidiary company acquire membership of holding company?

A subsidiary cannot normally be a member of its holding company, except in a few exceptional cases.

Under the Companies Act, a subsidiary company is generally prohibited from becoming a member of, or holding shares in, its holding company, and any such allotment or transfer is void. This is to prevent indirect self-holding of shares. However, membership is permitted in these exceptional circumstances:

• As legal representative — where the subsidiary holds the shares as the legal representative of a deceased member of the holding company.
• As a trustee — where the subsidiary holds the shares as a trustee, provided the holding company or its subsidiary is not beneficially interested under that trust. …