Editing Subsidiary (section)

===European Union===
Recital 31 of Directive 2013/34/EU<ref>{{cite web|url=http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:32013L0034|access-date=2015-01-15|title=Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC|date=29 June 2013|archive-date=29 April 2015|archive-url=https://web.archive.org/web/20150429214243/http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:32013L0034|url-status=live}}</ref> stipulates that control should be based on holding a majority of voting rights, but control may also exist where there are agreements with fellow shareholders or members. In certain circumstances, control may be effectively exercised where the parent holds a minority or none of the shares in the subsidiary.

According to Article 22 of the directive 2013/34/EU an undertaking is a parent if it:
* has a majority of the shareholders' or members' voting rights in another undertaking (a subsidiary undertaking);
* has the right to appoint or remove a majority of the members of the administrative, management or supervisory body of another undertaking (a subsidiary undertaking) and is at the same time a shareholder in or member of that undertaking;
* has the right to exercise a dominant influence over an undertaking (a subsidiary undertaking) of which it is a shareholder or member, pursuant to a contract entered into with that undertaking or to a provision in its memorandum or articles of association, where the law governing that subsidiary undertaking permits its being subject to such contracts or provisions.
* is a shareholder in or member of an undertaking, and:
** a majority of the members of the administrative, management or supervisory bodies of that undertaking (a subsidiary undertaking) who have held office during the financial year, during the preceding financial year and up to the time when the consolidated financial statements are drawn up, have been appointed solely as a result of the exercise of its voting rights; or
** controls alone, pursuant to an agreement with other shareholders in or members of that undertaking (a subsidiary undertaking), a majority of shareholders' or members' voting rights in that undertaking.
Additionally, control may arise when:
* a parent undertaking has the power to exercise, or actually exercises, dominant influence or control over another undertaking (the subsidiary undertaking); or
* a parent undertaking and another undertaking (the subsidiary undertaking) are managed on a unified basis by the parent undertaking.

Under the international accounting standards adopted by the EU<ref>{{cite web|url=http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=OJ:L:2008:320:TOC|access-date=2015-01-15|title=COMMISSION REGULATION (EC) No 1126/2008 of 3 November 2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council|archive-date=2016-03-05|archive-url=https://web.archive.org/web/20160305011904/http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=OJ:L:2008:320:TOC|url-status=live}}</ref> a company is deemed to control another company only if it has all the following:
* power over the other company;
* exposure, or rights, to variable returns from its involvement with the other company; and
* the ability to use its power over the other company to affect the number of the company's returns ([[IFRS]] 10 para 7). Power generally arises when the parent has rights that give it the ability to direct the relevant activities, i.e. the activities that significantly affect the other subsidiary's returns.

A subsidiary can have only one parent; otherwise, the subsidiary is, in fact, a joint arrangement (joint operation or joint venture) over which two or more parties have joint control (IFRS 11 para 4). Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.