A 15-point directive, which details the guidelines for establishing subsidiary company, issued today also allows the parent company to hold equity in the range of 51 percent in minimum to 70 percent in maximum.
However, the directives have categorically listed a set of conditions that the financial institutions are required to meet in order to get approval from central bank to establish subsidiary companies.
Apart from maintaining a minimum capital fund, financial institutions applying for license to establish subsidiary company also need to maintain a minimum paid up capital set by the central bank, the directives stated. In addition, financial institutions looking for instituting such subsidiary company will also need to have non-performing loans of less than 5 percent at the latest quarter.
The directives will allow the subsidiary companies to work as an issue manager of shares, issue underwriting on the shares floated by public limited companies for public subscriptions, provide registration services and keep shareholders´ record on behalf of share issuing company among other activities.
However, the directives have barred parent company from investing or extending loans against the debentures issued by the subsidiary company. Likewise, parent companies are also required to submit the financial details of the subsidiary company that they own majority of share.
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