holding company


A holding company is a company whose primary business is holding a controlling interest in the securities of other companies. A holding company usually does not produce goods or services itself. Its purpose is to own shares of other companies to form a . In some jurisdictions around the world, holding companies are called parent companies, which, besides holding stock in other companies, can conduct trade and other business activities themselves. Holding companies reduce for the s, and can permit the ownership and control of a number of different companies. ' also refers to the term ''parent holding company.'' Holding companies are also created to hold assets such as or trade secrets, that are protected from the operation company. That creates a smaller risk when it comes to . In the , 80% of stock, in voting and value, must be owned before consolidation benefits such as s can be claimed. That is, if Company A owns 80% or more of the stock of Company B, Company A will not pay paid by Company B to its stockholders, as the payment of dividends from B to A is essentially transferring cash within a single enterprise. Any other shareholders of Company B will pay the usual taxes on dividends, as they are legitimate and ordinary dividends to these shareholders. Sometimes, a company intended to be a pure holding company identifies itself as such by adding "Holding" or "Holdings" to its name.

By country


The parent company–subsidiary company relationship is defined by Part 1.2, Division 6, Section 46 of the , which states:
A (in this section called the first body) is a subsidiary of another body corporate if, and only if: :(a) the other body: ::(i) controls the composition of the first body's board; or ::(ii) is in a position to cast, or control the casting of, more than one-half of the maximum number of votes that might be cast at a of the first body; or ::(iii) holds more than one-half of the issued share capital of the first body (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital); or :(b) the first body is a subsidiary of a subsidiary of the other body.


Toronto-based lawyer Michael Finley has stated, "The emerging trend that has seen international plaintiffs permitted to proceed with claims against Canadian parent companies for the allegedly wrongful activity of their foreign subsidiaries means that the corporate veil is no longer a silver bullet to the heart of a plaintiff’s case."


The parent subsidiary company relationship is defined by Part 1, Section 5, Subsection 1 of the Companies Act, which states:
5.—(1) For the purposes of this Act, a corporation shall, subject to subsection (3), be deemed to be a subsidiary of another corporation, if — :(a) that other corporation — ::(i) controls the composition of the board of directors of the first-mentioned corporation; or ::: ct 36 of 2014 wef 01/07/2015::(ii) controls more than half of the voting power of the first-mentioned corporation; or ::(iii) eleted by Act 36 of 2014 wef 01/07/2015:(b) the first-mentioned corporation is a subsidiary of any corporation which is that other corporation's subsidiary

United Kingdom

In the United Kingdom, it is generally held that an organisation holding a 'controlling stake' in a company (a holding of over 51% of the stock) is in effect the de facto parent company of the firm, having overriding material influence over the held company's operations, even if no formal full takeover has been enacted. Once a full takeover or purchase is enacted, the held company is seen to have ceased to operate as an independent entity but to have become a tending subsidiary of the purchasing company, which, in turn, becomes the parent company of the subsidiary. (A holding below 50% could be sufficient to give a parent company material influence if they are the largest individual shareholder or if they are placed in control of the running of the operation by non-operational shareholders.)

Company law

In the United Kingdom, the term "Holding Company" is defined by the at section 1159. It defines a Holding Company as a Company that holds a majority of the voting rights in another company, OR is a member of another company and has the right to appoint or remove a majority of its board of directors, OR is a member of another company and controls alone, pursuant to an agreement with other members, a majority of the voting rights in that company.

United States


After the , many U.S. investment banks converted to holding companies. According to the 's (FFIEC) website, , , , , and were the five largest bank holding companies in the finance sector, as of 31 December 2013, based on total assets.


The in the United States caused many energy companies to divest their subsidiary businesses. Between 1938 and 1958 the number of holding companies declined from 216 to 18. passed in 2005 removed the 1935 requirements, and has led to mergers and holding company formation among power marketing and power brokering companies.


In US , many major s have purchased smaller broadcasters outright, but have not changed the s to reflect this, resulting in stations that are (for example) still licensed to and , effectively making them such as subsidiary companies of their owner . This is sometimes done on a per- basis. For example, in both and later are licensed to "WNNX LiCo, Inc." (LiCo meaning "license company"), both owned by (which was later sold to ). In determining s to prevent excessive , all of these are to the parent company, as are s, as a matter of .

Personal holding company

In the United States, a personal holding company is defined in section 542 of the . A corporation is a personal holding company if both of the following requirements are met: * Gross income test: At least 60% of the corporation's adjusted ordinary gross income is from dividends, interest, rent, and royalties. * Stock ownership test: More than 50% in value of the corporation's outstanding stock is owned by five or fewer individuals.

Parent company

A parent company is a that owns 51% or more in another firm (or ) to control management and operations by influencing or electing its . The second company is deemed to be a ''subsidiary of the parent company. The definition of a parent company differs from to jurisdiction, with the definition'' normally being defined by way of in that jurisdiction. When an existing company establishes a new company and keeps majority shares with itself, and invites other companies to buy minority shares, it is called a parent company. A parent company could simply be a company that wholly owns another company, which is then known as a "".

See also

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External links

Emergence of Electrical Utilities in America
at Smithsonian Institution's {{DEFAULTSORT:Holding Company Types of business entity