Definition Of A Subsidiary
Before we can do any basic consolidation exercise, we need to at least understand what is a subsidiary. Append below is the definition:
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Definition Of Subsidiary |
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Companies Act defines a subsidiary company as one: |
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(a) in which the investor company (i) controls the composition of the board of directors of the investee company; (ii) controls more than one half of the voting power of the investee company; or (iii) holds more than one half of the issued shared capital ( excluding preference shares); or |
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(b) which is a subsidiary of a subsidiary of the investor company. Illustration: The investor company is the holding company of the investee company if the investee company is its subsidiary. For example H holds more than 50% of the equity shares of S1,S2,S3. Therefore H, S1, S2 and S3 form a group, with H being the holding company and the other companies being subsidiaries of H. |
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