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Companies can have only two layers of subsidiaries

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Companies can have only two layers of subsidiaries
Corporates can have only two layers of subsidiaries under the companies law, with the government putting in place stricter norms as it continues with the clampdown on illicit fund flows.
While the rules would be applicable prospectively, companies that already have more than two layers of subsidiaries have to furnish details about them to the government.

Banking and non-banking financial companies as well as insurance firms and government companies have been exempted from the restrictions, according to notification issued by the corporate affairs ministry.

The rules, notified after public consultation, came into effect from Wednesday.

It assumes significance against the back drop of concerns that shell companies are being floated to act as conduits for illicit funding activities.

The Business Standard, New Delhi, 23th September 2017

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