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Rule 2Chapter 2

Restriction on number of layers for certain classes of holding companies

(1)

On and from the date of commencement of these rules, no company, other than a company belonging to a class specified in sub-rule (2), shall have more than two layers of subsidiaries:

Proviso

Provided that the provisions of this sub-rule shall not affect a company from acquiring a company incorporated outside India with subsidiaries beyond two layers as per the laws of such country:

Proviso

Provided further that for computing the number of layers under this rule, one layer which consists of one or more wholly owned subsidiary or subsidiaries shall not be taken into account.

(2)

The provisions of this rule shall not apply to the following classes of companies, namely:—

(a)

a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);

(b)

a non-banking financial company as defined in clause (f) of Section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934) which is registered with the Reserve Bank of India and considered as systematically important non-banking financial company by the Reserve Bank of India;

(c)

an insurance company being a company which carries on the business of insurance in accordance with provisions of the Insurance Act, 1938 (4 of 1938) and the Insurance Regulatory Development Authority Act, 1999 (41 of 1999);

(d)

a Government company referred to in clause (45) of section 2 of the Act.

(3)

The provisions of this rule shall not be in derogation of the proviso to sub-section (1) of section 186 of the Act.

(4)

Every company, other than a company referred to in sub-rule (2), existing on or before the commencement of these rules, which has number of layers of subsidiaries in excess of the layers specified in sub-rule (1) –

(i)

shall file, with the Registrar a return in Form CRL-1 disclosing the details specified therein, within a period of one hundred and fifty days from the date of publication of these rules in the Official Gazette;

(ii)

shall not, after the date of commencement of these rules, have any additional layer of subsidiaries over and above the layers existing on such date; and

(iii)

shall not, in case one or more layers are reduced by it subsequent to the commencement of these rules, have the number of layers beyond the number of layers it has after such reduction or maximum layers allowed in subrule (1), whichever is more.

(5)

If any company contravenes any provision of these rules the company and every officer of the company who is in default shall be punishable with fine which may extend to ten thousand rupees and where the contravention is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which such contravention continues.

Annexure

Form CRL-1 Return regarding number of layers (see clause (i) of sub-rule (4)of Rule 2)

1. (a) Name of the company: _______________

(b)

CIN of the company: _______________

2. Number of layers of subsidiaries as on the date of commencement of these rules _____

3. Layer wise details of subsidiary companies

SN Name of subsidiary CIN of subsidiary

company

Name of holding

company CIN of holding

company

Per centage of

shares held by

holding company

Layer 1

1 SL1-1

2 SL1-2

3 SL1-3

Layer 2 ……..

.. SL2-1

.. SL2-2

.. SL2-3

Layer 3.. …..

.. SL3-1

.. SL3-2

.. SL3-3

.Layer 4. …….

.. SL4-1

.. SL4-2

.. SL4-3

.. ……

..Upto last

layer

….. ….. ….. ….. …..

Notes, amendments & references (8)

I (Name of director of the company signing the Form) am authorised by the Board of Directors of the company vide resolution number _______ dated ________ (DD/MM/YYYY) to sign this form and declare that —

(1) the information of the subsidiaries and the layers as contained in the form is true, correct and complete and no information has been suppressed or concealed.

(2) I have read the provisions of section 448 and 449 of Companies Act, 2013 which provide for punishment for false statement and punishment for false evidence respectively.

To be digitally signed by

Director DSC

Director Identification Number of the Director

Date:

Place: