An example of a typical corporate group structure is as follows:. There are various reasons why having a holding company in a group structure is more beneficial than having a standalone company. One of the main benefits is risk management. If a company undertakes multiple trades, or has separate investments such as property, then stripping these out into separate subsidiary companies under the common control of a holding company should be considered. Under a group structure, the risk to the trade of the subsidiaries would be minimised should one part of the overall group perform poorly or become insolvent.
This would not be the case if everything was operated within a single company. A holding company can be used to hold the valuable assets of a business such as trading or investment property, plant and machinery, intellectual property and excess cash to allow for investments. The subsidiaries then take on the daily operations of the business and its trading responsibilities. The assets held can be leased to the subsidiaries if required, but should be protected from creditors and general inherent risks that are associated with trading companies.
Dividends can pass between the subsidiary companies and the holding company without incurring tax charges. There may be admin and central services functions that are utilised by different businesses. These can sit naturally within a holding company, which then makes charges to the subsidiaries so that the costs are shared appropriately amongst them.
If the subsidiary is the subject of any creditor or legal judgments, the subsidiary wouldn't lose the assets because did not own them. If needed, it is possible for the subsidiary to declare bankruptcy and close. The holding company can then establish a new subsidiary that leases the same assets. The IPHC will create a license arrangement with the subsidiaries to provide use of the intellectual property for a royalty fee.
The license arrangements will be set for an agreed upon period of time. The holding company will draft and sign an agreement with the subsidiary that states the following:.
The holding company may be very involved in the management of the subsidiary's budget and operations, while others will only intervene if there are issues. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data.
We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Business Essentials Guide to Mergers and Acquisitions.
Business Business Essentials. What Is a Holding Company? Key Takeaways A holding company is a type of financial organization that owns a controlling interest in other companies, which are called subsidiaries.
The parent corporation can control the subsidiary's policies and oversee management decisions but doesn't run day-to-day operations. Holding companies are protected from losses accrued by subsidiaries—so if a subsidiary goes bankrupt, its creditors can't go after the holding company.
Compare Accounts. Related posts. How is a Limited Liability Partnership formed? How do I get articles of association? Does a dormant company need to file a tax return? How to close a company online 1 Aug Thanks for sharing a great article. It was very useful and Informative for me. We are glad you found this article useful.
Kind regards, Tana.
0コメント