The Companies (Restriction on number of layers)Rules, 2017

MINISTRY OF CORPORATE AFFAIRS
NOTIFICATION
New Delhi, the 20th September, 2017

G.S.R. 1176(E).—In exercise of the powers conferred under proviso to clause (87) of section 2, section 450
read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government
hereby makes the following rules, namely:—
1. Short title and Commencement.—(1) These rules may be called the Companies (Restriction on number of layers)
Rules, 2017.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. Restriction on number of layers for certain classes of holding companies.—(1) On and from the date of
commencement of these rules, no company, other than a company belonging to a class specified in sub-rule (2), shall
have more than two layers of subsidiaries:
Provided that the provisions of this sub-rule shall not affect a company from acquiring a company incorporated
outside India with subsidiaries beyond two layers as per the laws of such country:
Provided further that for computing the number of layers under this rule, one layer which consists of one or
more wholly owned subsidiary or subsidiaries shall not be taken into account.
4 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(i)]
(2) The provisions of this rule shall not apply to the following classes of companies, namely:—
(a) a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);
(b) a non-banking financial company as defined in clause (f) of Section 45-I of the Reserve Bank of India Act,
1934 (2 of 1934) which is registered with the Reserve Bank of India and considered as systematically important
non-banking financial company by the Reserve Bank of India;
(c) an insurance company being a company which carries on the business of insurance in accordance with
provisions of the Insurance Act, 1938 (4 of 1938) and the Insurance Regulatory Development Authority Act,
1999 (41 of 1999);
(d) a Government company referred to in clause (45) of section 2 of the Act.
(3) The provisions of this rule shall not be in derogation of the proviso to sub-section (1) of section 186 of the Act.
(4) Every company, other than a company referred to in sub-rule (2), existing on or before the commencement of
these rules, which has number of layers of subsidiaries in excess of the layers specified in sub-rule (1) –
(i) shall file, with the Registrar a return in Form CRL-1 disclosing the details specified therein, within a period of
one hundred and fifty days from the date of publication of these rules in the Official Gazette;
(ii) shall not, after the date of commencement of these rules, have any additional layer of subsidiaries over and
above the layers existing on such date; and
(iii) shall not, in case one or more layers are reduced by it subsequent to the commencement of these rules, have the
number of layers beyond the number of layers it has after such reduction or maximum layers allowed in subrule (1), whichever is more.
(5) If any company contravenes any provision of these rules the company and every officer of the company who is
in default shall be punishable with fine which may extend to ten thousand rupees and where the contravention is
a continuing one, with a further fine which may extend to one thousand rupees for every day after the first
during which such contravention continues.