Distinguish between Holding Company and Subsidiary Company – what are the relationships between the two?

Holding Company:-

When a company acquires controlling interest in the affairs of another company or companies, it is known as the holding company. The Companies Act in its definition clause at section 2 clarifies, inter alia, that the holding of such controlling interest should take all or one of the following forms:

1. its assets may consist in whole or in part of shares in another company;
2. such shares or other interests may be held either directly or through a nominee.
3. such interest should be in the form of holding more than fifty percent of shares or voting rights in that other company.
4. such voting right gives power directly or indirectly to appoint the majority of the directors in that other company otherwise than by virtue of the provision of a trust –deed.

Subsidiary Company:-

It is a company more than fifty percent of whose issued share capital or voting power is held by another company or the majority of whose directors can be appointed by another company. A subsidiary company may be a public or private company or not even be a company at all within the meaning of the Companies Act. Where the shares of such a company are held as security by a company the ordinary business of which is lending of money or where the majority of directors can be appointed by a company by virtue of powers contained in a debenture trust-deed, the former company will not be deemed to be a subsidiary company of the latter.