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What is a Deemed Public Company? Explained with Examples

A Deemed Public Company is a company which is a subsidiary of a company, not being a private company.

Even where such subsidiary company continues to be a private company in its articles, it will be deemed to be a public company.


Companies Act, 2013

The Act does not specifically define the term - deemed public company.

Refer to the 'proviso' of clause (71) of section 2 of the Companies Act, 2013 to find out the meaning of deemed public company, which is explained at the top.





Scenarios / Examples

Case #1 : Deemed Public Company

OIU Limited is a public company.
FIG Private Limited is a private company.
FIG Private Limited is a subsidiary of OIU Limited.

In this case, FIG Private Limited will be deemed to be a public company.


Case #2 : Not a Deemed Public Company

LKJ Private Limited is a private company.
DSA Limited is a public company.
DSA Limited is a subsidiary of LKJ Private Limited.

In this case, LKJ Private Limited will not be deemed to be a public company.


Extra Notes

1) A deemed public company will have to comply with the provisions of the Companies Act and the rules made thereunder as if it is a public company. Even though it is a private company, it still has to comply as if it is a public company.




2) A deemed public company does not have to compulsorily convert itself into a public company just because it has gained the status of a deemed public company.

3) A deemed public company does not necessarily have to make alterations in its Memorandum and Articles of Association to make it the same as if a public company.

4) A deemed public company does not have to increase the shareholders' numbers up to seven as needed for a public company.

5) A deemed public company does not have to change its existing clauses of Articles as per section 2(68), regarding i. restricting the right to transfer securities; ii. limiting no. of shareholders to two hundred; and iii. prohibiting any invitation to the public to subscribe for any its securities.



Comments

  1. What is the status of DSA limited co. In the 2nd example. Is it private co. Or public co.

    ReplyDelete
    Replies
    1. DSA Limited is a public company.

      Delete

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