Membership of holding company
21.—(1)  A corporation cannot be a member of a company which is its holding company, and any allotment or transfer of shares in a company to its subsidiary is void.
(1A)  Subsection (1), insofar as it provides that any transfer of shares in contravention of it is void, does not apply to a disposition of book‑entry securities, but a Court, on being satisfied that a disposition of book‑entry securities would in the absence of this subsection be void may, on the application of the Registrar or any other person, order the transfer of the shares acquired in contravention of subsection (1).
[36/2014]
(2)  Subsection (1) does not apply where the subsidiary is concerned as personal representative, or where it is concerned as trustee, unless the holding company or a subsidiary thereof is beneficially interested under the trust and is not so interested only by way of security for the purposes of a transaction entered into by it in the ordinary course of a business which includes the lending of money.
(3)  This section does not prevent a subsidiary which, on 29 December 1967, is a member of its holding company, from continuing to be a member but, subject to subsection (2), the subsidiary has no right to vote at meetings of the holding company or any class of members thereof.
(4)  This section does not prevent a subsidiary from continuing to be a member of its holding company if, at the time when it becomes a subsidiary of the holding company, it already holds shares in that holding company, but —
(a)subject to subsection (2), the subsidiary has no right to vote at meetings of the holding company or any class of members thereof; and
(b)subject to subsections (4A) and (4B), the subsidiary must, within the period of 12 months or such longer period as the Court may allow after becoming the subsidiary of its holding company, dispose of all of its shares in the holding company.
[36/2014]
(4A)  To avoid doubt, subsection (4)(b) ceases to apply if, during the period referred to in that subsection, the subsidiary ceases to be a subsidiary of the holding company.
[36/2014]
(4B)  Any shares in the holding company that are not disposed of in accordance with subsection (4)(b) may, subject to subsections (4C) and (6E), be held or continued to be held by the subsidiary.
[36/2014]
(4C)  With respect to the shares referred to in subsection (4B) —
(a)subject to this subsection and subsection (6E), sections 76J(1), (2), (3), (5) and (6) and 76K apply with the necessary modifications, including the following modifications:
(i)a reference to treasury shares is a reference to shares referred to in subsection (4B);
(ii)a reference to a company holding treasury shares is a reference to a subsidiary holding shares referred to in subsection (4B);
(iii)the reference in section 76J(6) to “as if they were purchased by the company at the time they were allotted, in circumstances in which section 76H applied” is a reference to “as if they were already held by the subsidiary at the time they were allotted, in circumstances in which section 21(4) applied”; and
(b)the holding company must, within 14 days after any change in the number of shares in the holding company which are held by any of its subsidiaries under subsection (4B), lodge with the Registrar a notice in the prescribed form.
[36/2014]
(5)  Subject to subsection (2), subsections (1), (3), (4), (4B), (6A) and (6C) apply in relation to a nominee for a corporation which is a subsidiary as if references in those subsections to such a corporation included references to a nominee for it.
[36/2014]
(6)  This section does not operate to prevent the allotment of shares in a holding company to a subsidiary which already lawfully holds shares in the holding company if the allotment is made by way of capitalisation of reserves of the holding company and is made to all members of the holding company on a basis which is in direct proportion to the number of shares held by each member in the holding company.
(6A)  This section does not operate to prevent the transfer of shares in a holding company to a subsidiary by way of a distribution in specie, amalgamation or scheme of arrangement but —
(a)subject to subsection (2), the subsidiary has no right to vote at meetings of the holding company or any class of members thereof; and
(b)subject to subsections (6B) and (6C), the subsidiary must, within the period of 12 months or such longer period as the Court may allow after the transfer to the subsidiary of the shares in the holding company, dispose of all of the shares in the holding company.
[36/2014]
(6B)  To avoid doubt, subsection (6A)(b) ceases to apply if, during the period referred to in that subsection, the subsidiary ceases to be a subsidiary of the holding company.
[36/2014]
(6C)  Any shares in the holding company that are not disposed of in accordance with subsection (6A)(b) may, subject to subsections (6D) and (6E), be held or continued to be held by the subsidiary.
[36/2014]
(6D)  With respect to the shares referred to in subsection (6C) —
(a)subject to this subsection and subsection (6E), sections 76J(1), (2), (3), (5) and (6) and 76K apply with the necessary modifications, including the following modifications:
(i)a reference to treasury shares is a reference to shares referred to in subsection (6C);
(ii)a reference to a company holding treasury shares is a reference to a subsidiary holding shares referred to in subsection (6C);
(iii)the reference in section 76J(6) to “as if they were purchased by the company at the time they were allotted, in circumstances in which section 76H applied” is a reference to “as if they were transferred to the subsidiary at the time they were allotted, in circumstances in which section 21(6A) applied”; and
(b)the holding company must, within 14 days after any change in the number of shares in the holding company which are held by any of its subsidiaries under subsection (6C), lodge with the Registrar a notice in the prescribed form.
[36/2014]
(6E)  With respect to any share referred to in subsection (4B) or (6C) —
(a)where the holding company has shares of only one class, the aggregate number of shares held by all the subsidiaries of the holding company under subsection (4B) or (6C) or by the holding company as treasury shares, must not at any time exceed 10% of the total number of shares of the holding company at that time;
(b)where the share capital of the holding company is divided into shares of different classes, the aggregate number of the shares of any class held by all the subsidiaries of the holding company under subsection (4B) or (6C) or by the holding company as treasury shares, must not at any time exceed 10% of the total number of the shares in that class of the holding company at that time;
(c)where paragraph (a) or (b) is contravened, the holding company must dispose of or cancel the excess shares, or procure the disposal of the excess shares by its subsidiary, in accordance with section 76K before the end of the period of 6 months beginning with the day on which that contravention occurs, or such further period as the Registrar may allow;
(d)where the subsidiary is a wholly‑owned subsidiary of the holding company, no dividend may be paid, and no other distribution (whether in cash or otherwise) of the holding company’s assets (including any distribution of assets to members on a winding up) may be made, to the subsidiary in respect of the shares referred to in subsection (4B) or (6C); and
(e)where the subsidiary is not a wholly‑owned subsidiary of the holding company, a dividend may be paid and other distribution (whether in cash or otherwise) of the holding company’s assets (including any distribution of assets to members on a winding up) may be made, to the subsidiary in respect of the shares referred to in subsection (4B) or (6C).
[36/2014]
(6F)  In subsection (6E)(c), “excess shares” means such number of the shares, held by any subsidiary under subsection (4B) or (6C) or by the holding company as treasury shares at the time in question, as resulted in the limit referred to in subsection (6E)(a) or (b) being exceeded.
[36/2014]
(6G)  In sections 7(9)(ca), 33(5A), 63A(1)(e), 74(1A), 76B(3E), 78, 81(4), 164A(1), 176(1A), 177(1), 179(8), 184(4)(b)(i), 201A(4)(b), 205B(6), 206(1)(b), 215(1), (1C), (1D) and (3A) and 232(1)(a)(i) —
(a)a reference to “treasury shares” includes a reference to shares held by a subsidiary under subsection (4B) or (6C); and
(b)a reference to a company being registered as a member of itself or being a member of itself includes a reference to a subsidiary being registered as a member of its holding company.
[36/2014; 40/2018]
(7)  Where but for this section a subsidiary would have been entitled to subscribe for shares in the holding company, the holding company may, on behalf of the subsidiary, sell the shares for which the subsidiary would otherwise have been entitled to subscribe.
(8)  In relation to a holding company that is a company limited by guarantee, the reference in this section to shares is to be read as including a reference to the interest of its members as such, whatever the form of that interest.
(9)  For the purposes of this section, a company must inform the Registrar of the occurrence of any of the following events by lodging a notice in the prescribed form within 14 days after the date of occurrence:
(a)where a shareholder of a company that is a corporation becomes a subsidiary of the company;
(b)where shares of the company are held by a subsidiary of the company and there is a change in the number of shares held by the subsidiary.
[36/2014]
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Last updated 16 Jun 2024
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