Fiduciary powers remain outside holding firm, subsidiary ambit

The government has said that fiduciary powers of an entity will not be taken into account while determining the holding company-subsidiary relationship.
The Corporate Affairs Ministry's move comes in the wake of representations from various quarters seeking clarity on exercise of powers in the 'fiduciary capacity' with regard to defining a subsidiary company.
Fiduciary power refers to authority vested with an entity to take financial decisions on behalf of someone else.
"...Shares held by a company or power exercisable by it in another company in a 'fiduciary capacity' shall not be counted for the purpose of determining the holding-subsidiary relationship in terms of the provision of section 2 (87) of the Companies Act, 2013," the ministry said in a circular on Friday.

The ministry, which is implementing the Companies Act, 2013 that replaces the nearly six-decade old legislation governing corporates in the country.
Stakeholders had sought clarification on whether shares held or power exercisable by a company in a 'fiduciary capacity' would be excluded while determining if a particular company is a subsidiary of another company.
"The stakeholders have further pointed out that in terms of section 4(3) of the Companies Act, 1956, such shares or powers were excluded from the purview of holding-subsidiary relationship," the circular said.