1) A holding company may control its subsidiary company as follows:

(a) By holding direct or indirect control over the formation of the board of directors;

(b) By holding majority shares of the company.

2) If any company becomes a subsidiary company of any other subsidiary company, the former company shall also be a subsidiary company of the holding company controlling the later company.

3) Despite that the shares of a company are subscribed by any agent on behalf of the holding company or its subsidiary company or that the right to appoint directors of such company is exercised by any person nominated on behalf of the holding company or its subsidiary company, the conditions mentioned in Sub-section (1) shall be deemed to have been fulfilled.

Provided, however, that while determining a holding company and a subsidiary company, the shares possessed in the following circumstances shall not be recognised for this purpose:

(a) In cases where any company is entitled to exercise any power on the basis of holding debentures or a trust deed on the issue of debentures or having subscribed shares;

(b) In cases where a company lending credit has accepted the shares by way of security.