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Monday, Apr 05, 2004

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Oil majors on a roll, but there's no `rollover'

S. Murlidharan

IS THE rollover benefit under Section 54ED available in respect of investments in the issues of IPCL, ONGC, and so on?

Gautam Ganapathy, e-mail

The current spate of issues are under the `offer for sale' route.

The Government is unloading its holdings in these companies in the primary market, whereas Section 54ED contemplates subscription to public issues — not necessarily initial public issues — by Indian public companies direct. Strictly, therefore, the current crop of issues under the offer of sale route do not make the grade under Section 54ED unless of course the CBDT relaxes the restriction in the interest of the Revenue as well as in public interest.

Fellow subsidiary

WHAT is the difference between a subsidiary and a fellow subsidiary?

M. S. Durga, Chennai

It is common for a parent to have more than one subsidiary. In that case, while the inter se relationship between the parent and each one of the subsidiaries would be that of holding-subsidiary, the inter se relationship between the subsidiaries would be that of a fellow subsidiary.

This is especially relevant for disclosure purposes. The subsidiaries apparently have nothing to do with each other but the fact that there is a common parent for all of them, brings about a closer relationship. Inter se dealings amongst them should be disclosed in terms of the AS-18 on `Related party transactions'.

AS-18 itself takes care to define a `fellow subsidiary' as follows: "A company is considered to be a fellow subsidiary of another company if both are subsidiaries of the same holding company."

In short, the parentage test does it!

Majority rule

WHY in an oppression petition the oppressed is almost invariably asked to be bought out?

Siddhartha Dutta, Kolkata

This is because the normal rule of law is that the majority will shall prevail.

But if the majority's overbearing actions bring discomfort to the minority, there is no other way but to part company.

This is precisely what is done by the Company Law Board (CLB) more often than not.

Therefore, the squabbling parties should voluntarily part company rather than do so after playing out a protracted and expensive litigation. But there is a more equitable solution possible.

The company law should be amended so as to require a special resolution — three-fourths majority — for all significant issues.

(ASK! Send in your queries on accounting, auditing, corporate law and taxation to

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Oil majors on a roll, but there's no `rollover'
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