Deemed Public Company ‑ Major shareholding with parent company outside India ‑ Whether the section operates to make Indian private company a public company - Companies Law - Letter : No. F. 8/16(1)/61‑PR,

Letter : No. F. 8/16(1)/61 ‑ PR, dated 9 ‑ 5 ‑ 1961. Subject:- Deemed Public Company ‑ Major shareholding with parent company outside India ‑ Whether the section operates to make Indian private company a public company Where a small percentage (say less than one) of the shares is held by individuals and the rest by the parent company outside India, section 43A would operate to make the Indian private company a public company. Actually, the section will operate except where the entire share capital is beneficially owned by the corporate body although one share may be held in the name of an individual as the nominee of the body corporate, or if the articles of the Indian private company prescribe a share qualification for the appointment as director, the individual owns share not exceeding that share qualification. The question of the percentage of shares held by individuals in India is immaterial. A private company, which becomes a public company by operation of law by virtue of section 43A, is required to comply with all the requirements of the Companies Act, which a public company is required to comply with, except where relaxation is permitted by law, and, for this purpose, it should reorganise its membership so as to comply with the provisions applicable to public companies. If, in any case, all the directors of a private company, which becomes a public company by virtue of operation of section 43A, become interested directors making it impossible for them to transact business, the remedy would be to increase the strength of the board by appointing disinterested directors or co‑opting or appointing additional disinterested directors, if so authorised by the articles. If this is found impracticable, it would be necessary to place the proposed contract before the general meeting for approval.