# Section 19 — Subsidiary Not to Hold Shares in Holding Company
## Main Rule
A subsidiary company cannot hold shares in its holding company, either by itself or through its nominees.
## Three Exceptions (when holding is permitted)
A subsidiary may hold shares of its holding company if it holds them as:
1. Legal representative of a deceased member of the holding company.
2. Trustee.
3. Shareholder — but only if the shares were held before it became a subsidiary of that holding company.
## Voting Rights
Right to vote at meetings of the holding company is available only when shares are held as:
- Legal representative, OR
- Trustee.
Not available when shares are held in the third category (as pre-existing shareholder).
## Allotment / Transfer After Subsidiary Status
- Any fresh allotment or transfer of shares of the holding company to its subsidiary (e.g., rights shares) shall be VOID.
- Exception: Bonus shares can be allotted.
- The subsidiary can voluntarily reduce its shareholding in the holding company at any time.
## Rationale
The rule prevents circular shareholding — where the holding company controls the subsidiary, and the subsidiary holds shares back in the holding company. This protects against indirect manipulation of holding company control and dilution of shareholder protection.