A company can be defined as a legal person with an existence of its own, quite distinct and separate from individuals

who compose it. Hence a company is a legal entity distinct from its directors or shareholders. A registered company becomes at law a different person altogether from the subscribers to the memorandum and though it may be that after incorporation, the business is precisely the same as it was before and the same persons are managers and the same hands receive profit, the company is in law not the agent of the subscriber or trustee for them.1 Under the statutory law a company is defined as, A company formed and registered under the Act or an existing company2 According to different Scholars, companies are divided into various types. While some classify companies into companies limited by shares, companies limited by guarantee and unlimited companies3, some classify them simply into; parent and subsidiary company, limited and unlimited companies and public and private companies.4 Some have gone far to the extent of classifying types of companies on the basis of incorporation, liability, ownership and control.5 Parent/Holding company; A company is called a holding company of another if it has control over that other.6A holding company holds more than 50% shares in another company. Hence the amount of shares a company holds in another company determines whether that company is a holding company of that other company. Therefore a holding company does not have any operation,activity or other active business,instead it owns assets which may be shares of stock in other corporations,limited liability companies or virtually anything else that has value.

1 2

Salomon v. Salomon (1897) AC 22. S.2 of companies Act No.12 of 2002 3 Massawe A.A.F (1996) Fundamentals of Business Law in Tanzania. Research Information and Publication Department. Mzumbe. Morogoro. Pg 246 4 th Janet Dine (2005) Company Law 5 Ed. Palgrave Macmillan. New York. Pg 6 5 th Kapoor, N.D (2006) Elements of Company Law 27 Ed. Sultan Chand & Sons. New Delhi. Pg 33 6 th Kapoor N.D (2006) Elements of Company Law 27 Ed. Sultan Chand & Sons. New Delhi. Pg 41.

Subsidiary company A company is known as a subsidiary of another company when control is exercised by the latter over the former.7Hence a company becomes a subsidiary of the holding company if the shareholding gives the first company control over the new company. In certain circumstances the financial affairs the subsidiary company must be disclosed by the parent company in its accounts.8 A company is deemed subsidiary company of another if; it is a subsidiary of another subsidiary, that other company control composition of the board of directors and if another company holds its majority shares. A company can be a member of another company if it is allowed to do so by its article of association, however a company cannot become a member of its own, this is due to fact that a member belongs to a group,and this position means that a company cannot buy or hold its own shares. In the case of TREVOR vs. WHITWORTH9 where W sold his shares to the company, but the company went into liquidation before the full price to be paid to W, though W claimed to have proof to the liquidator for the balance of price of share, still W failed on the position that the company cannot buy its own shares and that the transaction was utraviour the company. Though it is not an absolute rule that a company may become a member to another company, however it is also an acceptable rule that a company may become a member to another company save for its subsidiary companies and holding companies, therefore this discussion covers subsidiary and holding company of the same. From the appointment day, the subsidiary company becomes the member of its holding company and that a subsidiary company is taken as a trustee or personal representative and that 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 business which includes the lending of money10. Personal representative, in order for holding company or subsidiary company to be a member to each other the acceptable means to be used is personal representative as discussed by various writers in different books. Fore stance when the holding company wants to be a
7

Ibid, section 487 of the Companies Act, provides ownership of shares which cannot be taken into consideration to determine control. 8 Op cit Fn 9 9 [1887]12 A.C 409 10 S.25(2) and (3) of Companies Act No.12 of 2002

member to the subsidiary company may appoint one person who will stand on behalf of the company and such appointed person will be acting on behalf of the other members of the holding company. Also such appointed person will be representing the members of holding company to the meetings of the subsidiary company as well as other issues relating to such new company which is the subsidiary company. Section 25 of the Companies Act also in some of its provision provides some exeption to this general rule which read as follow, (l) Except as mentioned in this section, a body corporate 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 shall be void. (2) Nothing in this section shall apply where the subsidiary is concemed as personal representative, or 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 business which includes the lending of money. (3) This section shall not prevent a subsidiary which is, at the appointed day, a member of its holding company, from continuing to be a member but, subject to subsection (2), the subsidiary shall have no right to vote at meetings of the holding company or any class of members thereof. The position that a company cannot be member of its own therefore it still covers the subsidiary and holding companies of the same company, hence the same Act allows the company to buy shares of its subsidiary and holding company11. A company is deemed to be subsidiary of another if, but only if that other either, (i) is a member of it and controls the composition of its board of directors; or (ii) Holds more than half in nominal value of its equity share capital12. In determining whether one company is a subsidiary of another, any shares held or power exercisable by that other in a fiduciary capacity shall be treated as not held or exercisable by it; subject to the paragraph that, any shares held or power exercisable by any person as a nominee for that other (except where that other is concerned only in a fiduciary capacity); or

11 12

S.487 of the Companies Act No.12 of 2002 S.487(1)(a)(i)and( ii) of the companies Act of 2002

by, or by a nominee for, a subsidiary of that other, not being a subsidiary which is concerned only in a fiduciary capacity13. Therefore, under s.25 and s.487 of the Companies Act No.12 0f 2002 a company is allowed to buy shares of its subsidiary and holding company, and though it is not an absolute position that a company can be a member to another company, but it is also an acceptable rule that a company may become member to another company save for its subsidiary and holding company.

13

S.487(3)a, b of the Companies Act No.12 of 2002