What is a Widely-held Company?
A widely-held company is a "company in which the public are substantially interested".
Difference between a closely held company and a widely held company
A closely-held company is just the opposite of a widely-held company.
Hence, it can be said that a closely-held company is a company in which the public are not substantially interested.
Whereas, a widely-held company is a company in which the public are substantially interested.
Definition of a "company in which the public are substantially interested"
Under sub-section (18) of section 2 of the Income-tax Act, 1961, the definition of "company in which the public are substantially interested" is prescribed.
The crux of the definition is—
The crux of the definition is—
A company is said to be a company in which the public are substantially interested—
i) if the company is owned by Govt of India or RBI or if in the company not less than 40% of the share capital is held by Govt of India or RBI or any corporation owned by that bank, whether singly or together; or
ii) if the company is registered under section 25 of the Companies Act 1956 (note: similar provisions now exist under section 8 of the Companies Act 2013); or
iii) if the company is a category of 'company having no share capital', and according to its objects, the nature and composition of its membership and other relevant considerations, it is considered and declared by the Board of Directors of the company as "a company in which the public are substantially interested"; or
iv) if the company is a "mutual benefit finance company" which is in the business of accepting deposits from its own members, and which is declared by Central Govt as a Nidhi or Mutual Benefit Society; or
v) if the company, wherein shares carrying not less than 50% of the voting rights have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by, one or more co-operative societies;
Note: Here, 'shares' mean not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits.
v) if the company, wherein shares carrying not less than 50% of the voting rights have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by, one or more co-operative societies;
Note: Here, 'shares' mean not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits.
vi) companies listed on a recognised stock exchange in India;
vii) if the company, not being a private company, whose shares carrying not less than 50% of the voting rights have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by—
(a) the Government, or
(b) a corporation established by a Central, State or Provincial Act, or
(c) any company to which this clause applies or any subsidiary company of such company if the whole of the share capital of such subsidiary company has been held by the parent company or by its nominees throughout the previous year.
Note #1: Here, 'shares' mean not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits.
Note #2: For Indian companies, whose business consists mainly in the construction of ships or in the manufacture or processing of goods or in mining or in the generation or distribution of electricity or any other form of power - the 'not less than 50%' condition will be applicable as 'not less than 40%' condition.
(a) the Government, or
(b) a corporation established by a Central, State or Provincial Act, or
(c) any company to which this clause applies or any subsidiary company of such company if the whole of the share capital of such subsidiary company has been held by the parent company or by its nominees throughout the previous year.
Note #1: Here, 'shares' mean not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits.
Note #2: For Indian companies, whose business consists mainly in the construction of ships or in the manufacture or processing of goods or in mining or in the generation or distribution of electricity or any other form of power - the 'not less than 50%' condition will be applicable as 'not less than 40%' condition.
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