Section 19 of the Companies Act, 2013
Section 19 of the Companies Act, 2013 deals with the subsidiary company not holding shares in its holding company.
📘 Section 19 – Subsidiary company not to hold shares in its holding company
(1) A company shall not, either by itself or through its nominees, hold any shares in its holding company.
Also, no holding company shall allot or transfer its shares to any of its subsidiary companies.
➤ If such allotment or transfer is made, it shall be void.
(2) Exception: The above rule does not apply if—
The subsidiary company is holding shares as the legal representative of a deceased member of the holding company.
The subsidiary is holding shares as a trustee.
The subsidiary company was already a shareholder before it became a subsidiary.
✅ In such cases, the subsidiary can vote at meetings of the holding company, only in respect of those shares.
🔍 Purpose of Section 19:
To prevent conflict of interest.
To ensure transparent ownership structures.
To protect investors and creditors by avoiding circular shareholding.
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