Group & Holding Structure Reorganisation: After Approval: What Continues
Group & Holding Structure Reorganisation does not end at approval — a set of obligations continues afterwards. The questions below are the ones raised most often in practice; the full scope of the service is on the Group & Holding Structure Reorganisation page.
Our group has an overseas holding company in Mauritius/Singapore/UAE. Does that affect the reorganisation?
Yes — a cross-border holding layer introduces additional considerations: Place of Effective Management (POEM) under Section 6(3) of the Income-tax Act 1961 (for income up to FY 2025-26; corresponding provision under Income-tax Act 2025 thereafter), which determines whether the foreign holding company could be treated as an Indian tax resident based on where key management decisions are actually made; applicable DTAA provisions and their evolving interpretation (particularly for capital gains taxation post the India-Mauritius protocol amendments); FEMA compliance for any transfer of shares or assets involving the foreign entity, including FC-TRS filings; and GAAR considerations if the foreign layer's primary purpose appears to be tax avoidance rather than genuine commercial substance. Reorganising around a cross-border holding structure needs coordinated India and offshore-jurisdiction advice.
In practice: Our Dubai office allows us to coordinate the India-side tax and FEMA analysis with the UAE-side entity and tax position under one engagement — this matters because a change on one side (say, collapsing a UAE holding layer) has direct India tax and FEMA reporting consequences that need to be assessed together, not sequentially by two disconnected advisors.
How does a group restructuring affect existing related-party transactions and Section 188 compliance?
Post-restructuring, the universe of 'related parties' under Section 2(76) of the Companies Act and the applicable related-party transaction (RPT) approval requirements under Section 188 typically changes — entities that were previously separate but unrelated may become part of the same group, or previously related entities may be consolidated into one, eliminating certain RPTs altogether while creating new ones (for instance, intercompany management fee or cost-sharing arrangements between the holding company and its subsidiaries). We recommend a fresh RPT policy review and, where the company is listed or has an Audit Committee requirement, updated omnibus approvals immediately after the scheme takes effect.
In practice: A restructured group that continues operating on its pre-restructuring RPT approvals — without revisiting them against the new entity map — accumulates a governance gap that surfaces at the next statutory or internal audit. We build the RPT policy refresh into the post-scheme integration checklist as a standard item.
Can carried-forward losses from a loss-making group company be used after a merger?
Only if the amalgamation satisfies the conditions of Section 2(1B) and the specific requirements of Section 72A of the Income-tax Act 1961 (for income up to FY 2025-26; corresponding provisions under Income-tax Act 2025 thereafter) — including retention of specified fixed assets of the amalgamating company for a minimum period, continuation of the business of the amalgamating company by the amalgamated company for a minimum period, and, for certain categories, that the amalgamating company was engaged in the business for a minimum period before the amalgamation. If these conditions are not satisfied, the accumulated business losses and unabsorbed depreciation of the transferor company lapse and cannot be carried forward into the amalgamated company.
In practice: We have declined to recommend a merger structured purely to 'absorb' a loss-making entity's tax losses where the underlying Sec 72A conditions clearly would not be met — the tax benefit would not survive assessment, and pursuing it anyway simply creates future litigation risk for the client.
What ongoing compliance does a holding company need once the group structure is in place?
A holding company carries its own standalone MCA compliance (Board meetings, AGM, AOC-4, MGT-7, statutory audit) in addition to consolidated financial statement preparation under Section 129(3) of the Companies Act, which requires the holding company to prepare consolidated financial statements incorporating all subsidiaries, associates, and joint ventures — this consolidation obligation applies regardless of whether the holding company is listed. It also needs a documented related-party transaction policy governing intercompany transactions (management fees, cost-sharing, intercompany loans/guarantees), and — if it has foreign subsidiaries or is itself foreign-owned — ongoing FEMA reporting including the Annual Return on Foreign Liabilities and Assets (FLA) and, if applicable, Overseas Direct Investment (ODI) Annual Performance Reports.
In practice: New holding companies frequently underestimate the consolidated financial statement obligation — it is a substantive annual exercise, not a formality, and needs a properly designed accounting close process across all subsidiaries from the first year the holding structure exists.
What does group reorganisation cost, roughly?
Cost varies significantly with the number of entities, whether the mechanism requires NCLT sanction or the simpler Section 233/private route, the extent of cross-border or regulatory complexity (CCI, sectoral NOCs, FEMA), and the depth of valuation work required. Professional fees typically cover the structuring diagnostic, tax modelling, coordination with the valuer, scheme support alongside legal counsel, and post-scheme integration work — this is quoted as a scoped engagement fee after the initial diagnostic, rather than a fixed published rate, because the entities and mechanism vary so widely between groups. NCLT filing fees, valuer/merchant banker fees, stamp duty, and legal counsel fees are separate from PNPC's professional fee and are estimated for the client upfront.
In practice: We deliberately avoid quoting a headline number before the structuring diagnostic — a two-entity fast-track merger and a five-entity cross-border demerger with CCI exposure are not comparable engagements, and a placeholder number quoted too early does a disservice to the client's actual planning.
Where this sits in the wider engagement
Group & Holding Structure Reorganisation rarely arrives on its own. The statutory basis and the current requirements are set out on the Group & Holding Structure Reorganisation service page, and the related services are grouped under Conversion Closure.
What PNPC does
PNPC Global has practised since 1986 across India and the UAE. On Group & Holding Structure Reorganisation we take the work end to end — reviewing the facts, preparing and filing what is required, and dealing with the authority through to closure.