Ministry of Corporate Affairs has notified the Rules that will be called as Companies (Restriction on number of layers) Rules, 2017. They shall come into force on the date of their publication in the official Gazette i.e. 20th September, 2017.
Restriction on number of layers for certain classes of holding companies.-
It provides that on and from the date of the Commencement of these Rules, no company, other than a company belonging to a class specified in sub rule (2), shall have more than two layers of subsidiaries.
However, the Companies are not restricted to acquire any Company incorporated outside India with subsidiaries beyond two layers as per the laws of such country.
Further, for computing the number of layers under this rule, one layer which consists of one or more wholly owned subsidiary or subsidiaries shall not be taken into account.
Sub-Rule (2) as stated above provides for the class of Companies which are exempted from the provisions of the aforesaid Sub-Rule (1). These are as follows:
- Banking Company
- Non-banking financial company
- Insurance Company
- Government Company
The provisions of this rule shall not be in derogation of the proviso to sub-section (1) of Section 186 of the Companies Act 2013.
On the commencement of these Rules:
- Every Company other than the exempted Companies, which has number of layers of subsidiaries in excess of the 2 layers, shall file, with the Registrar a return in Form CRL-1 disclosing the details specified therein, within a period of one hundred and fifty days (150 days) from the date of publication of these rules in the official Gazette , and
- Shall not, after the date of commencement of these rules,have any additional layer of subsidiaries over and above the layers existing on such date.
- If the layers of holding in subsidiaries are subsequently reduced, the company shall have the numbers of layers after reduction or limit specified in these rules, whichever is more.
If any company contravenes any provision of these rules the Company and every officer of the company who is in default shall be punishable with fine which may extend to ten thousand rupees and where the contravention is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which such contravention continues.
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