Q.Distinguish, in brief, between a Holding Company and a Subsidiary Company.

These two terms always describe a relationship BETWEEN two companies, never a company standing on its own.

Under Sections 2(46) and 2(87) of the Companies Act, 2013, 'holding company' and 'subsidiary company' describe the two sides of the same controlling relationship. A company is the holding company of another company (the subsidiary company) if it either (a) controls the composition of the subsidiary's Board of Directors, or (b) holds, directly or through another subsidiary, more than one-half of the subsidiary's total voting power. In practical terms, the holding company is the one exercising control, and the subsidiary is the one being controlled, even though both remain separate legal persons, each capable of owning property and entering into contracts in its own name. This structure is common in large business groups, where a parent (holding) company controls several subsidiaries, each often engaged in a distinct line of business, while each subsidiary continues to be a full-fledged company under the Act in its own right, filing its own returns and preparing its own accounts, subject also to group-level consolidation requirements.

Students sometimes think a subsidiary loses its own separate legal identity once controlled by a holding company — a subsidiary remains a fully separate legal person; only its control, not its legal existence, rests with the holding company.