Query: one of Private Limited Company has 5 directors out of which 4 directors are directors of unlisted public limited company. Further Unlisted Public Limited Company has total 6 Directors. There is no shareholding of company in each other. But, Directors and relatives hold 100% shareholding in both companies. Also, Turnover of Pvt. Limited Company is more than unlisted public limited company for the FY 2014-15.
Is consolidation of financial statements required for the financial year ended 31.03.2015 as per Companies Act, 2013.
Answer: As per Section 2(87) of the Companies Act 2013, subsidiary company means a company in which holding company –
(a) Controls the composition of Board of directors
(b) Exercises or controls more than one-half of the total share capital either at its own or together with one or more of its subsidiary companies.
Further, Section 129(3) of the Companies Act, 2013 mandates every company to prepare a consolidated financial statement for all the Companies having one or more subsidiaries.
So, consolidation of financial statements shall be required as the directors of Unlisted Public Company control the composition of Board of Private Company.