« Top Headlines » Open DEMAT Account in 24 hrs  Delhi HC Rules GST Registration Cannot Be Cancelled Retrospectively Without a Clear Show Cause Notice (SCN)  Belated income tax return AY 2026-27: How to file, late filing charges and what you may lose  Major Financial Changes from August 1, 2026: ITR Deadline, RBI MPC Meeting, Tatkal Ticket Rules & More  Government proposes to ease tax relief conditions for offshore funds  TallyPrime Connected Banking: Automating Banking and Accounting  ITR Filing Deadline 2026: Is July 31 the Last Date to File Your Income Tax Return? Latest Official Update  ITR filing deadline nears: How to file income tax return online on e-filing portal - quick 15-step guide  Will the ITR Filing Deadline Be Extended Beyond July 31 for FY 2025-26? Here's the Latest Update for Taxpayers  Income Tax Refund Delayed for AY 2026-27? 5 Common Reasons Your Refund May Be Stuck and How to Fix It  ITR Filing 2026: FM Nirmala Sitharaman Asks Tax Officials to Let Honest Taxpayers Correct Genuine Mistakes  Will Your FCNR Deposit Stay Tax-Free After Returning to India? Tax Rules Explained for NRIs «  Guarantee on capital, not returns... If only `torn books' repaired themselves `as they landed... » When does private turn public? August, 31st 2006 The Delhi High Court has held that "unless a private company is a subsidiary of a public company it cannot be treated as a public company." The Companies (Amendment) Act 2000 had amended Section 3 of the 1956 Act to provide that a private corporate which is a subsidiary of public company will be public outfit. The Amendment Act had specifically removed the category of `deemed public companies' under Section 43A of the Act. A deemed public company basically refers to a private company which is deemed to have become public under certain circumstances. However, such deemed public companies were permitted by Section 43A to retain the three restrictive conditions which are mandatorily required to be present in the Articles of a private company. These conditions, inter alia, restrict the free transferability of shares, and prohibit inviting the public to subscribe to the shares of the company. The Amendment Act had also provided a summary procedure for conversion of a deemed public company into a private company. Thus, in effect, the legal position is that the law permits only two categories of companies public and private. However, notwithstanding this clear position, one basic issue still remains un-resolved: Can a private company which is a subsidiary of a public company continue to retain the three restrictive conditions in its Articles? CLB vs High Court ruling This confusion is further compounded by a recent decision of the Company Law Board (CLB) in Hillcrest Realty Sdn.Bhd vs Hotel Queenroad (P) Ltd [(2006) 72 CLA 245 CLB]. In this case, the CLB held that the basic characteristics of a private company do not get altered by the mere fact that such a company is a subsidiary of a public company. The CLB further held that such a company may be a public company for the other provisions of the Act, but the three restrictive conditions contained in its Articles will continue to be operative. This decision will only re-establish the position of a third category of companies, whereas the Amendment Act had categorically removed the same. Incidentally, the Delhi High Court, in the Hotel Queenroad (P) Ltd vs Hillcrest Realty Sdn.Bhd [(2006) 68 SCL 197] case, held that "unless a private company is a subsidiary of a public company it cannot be treated as a public company." The court, on this basis, denied voting rights of preference shareholders of a private company on the ground that it was not the subsidiary of a public company. The court's views are certainly in line with the spirit of the Amendment Act and should prevail. However, the Government must clear the iota of confusion by further amending the Act so as to replace the words "nothing in this section will apply to a private company unless it is a subsidiary of a public company" by the words "nothing in this section shall apply to a private company." Amit K. Vyas (The author is Counsel Company Affairs and Legal of L&T Ltd, Mumbai.)