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.