08 Jul 2025

Material-Subsidiaries-for-Equity-Listed-Companies

Material-Subsidiaries-for-Equity-Listed-Companies

What are the compliances related to Material Subsidiaries for Equity Listed Companies?

S.NO

DEFINITIONS

COMPLIANCE

  1.  

Material subsidiary shall mean a subsidiary, whose [turnover] or net worth exceeds [ten] percent of the consolidated [turnover] or net worth respectively, of the listed entity and its subsidiaries in the immediately preceding accounting year.

SECRETARIAL AUDIT

Every listed entity and its material unlisted subsidiaries incorporated in India shall undertake Secretarial Audit by a Secretarial Auditor who shall be a Peer Reviewed Company Secretary and shall annex a Secretarial Audit Report in such form as specified, with the annual report of the listed entity.

DISPOSAL OF SHARES

A listed entity shall not dispose of shares in its material subsidiary resulting in reduction of its shareholding (either on its own or together with other subsidiaries) to less than [or equal to] fifty percent or cease the exercise of control over the subsidiary without passing a special resolution in its General Meeting except in cases where such divestment is made under a scheme of arrangement duly approved by a Court/Tribunal[, or under a resolution plan duly approved under section 31 of the Insolvency Code and such an event is disclosed to the recognized stock exchanges within one day of the resolution plan being approved

POLICY

The listed entity shall formulate a policy for determining ‘material’ subsidiary.

SELLING, DISPOSING AND LEASING OF ASSETS

Selling, disposing and leasing of assets amounting to more than twenty percent of the assets of the material subsidiary on an aggregate basis during a financial year shall require prior approval of shareholders by way of special resolution, unless the sale/disposal/lease is made under a scheme of arrangement duly approved by a Court/Tribunal [, or under a resolution plan duly approved under section 31 of the Insolvency Code and such an event is disclosed to the recognized stock exchanges within one day of the resolution plan being approved]

  1.  

If 20 % of the consolidated [turnover] or net worth respectively, of the listed entity and its subsidiaries in the immediately preceding accounting year

 

At least one independent director on the board of directors of the listed entity shall be a director on the board of directors of an unlisted material subsidiary, whether incorporated in India or not.

Disclaimer: The contents of this article are based on current provisions and available information. While every effort has been made to ensure accuracy and reliability, no responsibility is assumed for any errors or omissions. Users are encouraged to refer to applicable laws and regulations. This article is not intended as legal advice, and no liability is accepted for any consequences arising from its use.

From the desk of CS SHARATH