Under Section 2(46) and Section 2(87) Companies Act 2013, a 'holding company' is a company in relation to one or more other companies which is the holding of one or more SUBSIDIARY companies. The Companies (Amendment) Act 2017 made which change?
Answer & Solution
Correct answer: B.
1. Section 2(87) proviso Companies Act 2013, as INSERTED by the Companies (Amendment) Act 2017, restricts the number of layers of subsidiaries: a class or classes of holding companies (as prescribed by Central Government) shall NOT HAVE LAYERS OF SUBSIDIARIES BEYOND PRESCRIBED NUMBER.
2. Companies (Restriction on Number of Layers) Rules, 2017 prescribe a limit of TWO LAYERS for most companies.
3. Carve-outs: (i) banking companies (Banking Regulation Act, 1949); (ii) NBFCs registered with RBI; (iii) insurance companies; (iv) Government companies.
4. Companies in existence prior to commencement of these rules shall continue with existing layers but cannot add further layers beyond 2.
5. Hence option B is correct.
_Source: Companies Act 2013 (Act 18 of 2013), Govt. of India MCA — Companies Act 2013, Section 2(87) proviso; Companies (Restriction on Number of Layers) Rules 2017_
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