As per Section 2(6) of the Companies Act, 2013, an Associate Company is defined as follows:
“Associate Company”, in relation to another Company, means a company in which another company has a significant influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company.
For the purpose of Section 2(6) of the Companies Act, 2013, explanation provided is as below:
- The expression “significant influence” means control of at least twenty percent of total voting power, or control of or participation in business decisions under an Agreement.
- The expression “joint venture” means a joint Agreement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.
Therefore, for a Company to be considered as an Associate Company of another company either the company should have significant influence over the other Company or it should be a joint venture company.
ELCOT has number of associate/ joint ventures companies whose shares are held by private promoters and ELCOT. Representatives of ELCOT are appointed as Directors of such companies along with Managing Director for efficient management purpose.