Editing Holding company

{{short description|Company that owns other companies' outstanding stock}}
{{redirect|Parent company|another meaning|Corporate spin-off}}
{{for|the band|Big Brother and the Holding Company}}
{{Use dmy dates|date=May 2021}}

{{Corporate law}}

A '''holding company''' is a [[company]] whose primary business is holding a [[controlling interest]] in the [[Security (finance)|securities]] of other companies.<ref>{{Cite web |title=holding company |url=https://www.merriam-webster.com/dictionary/holding+company |url-status=live |archive-url=https://web.archive.org/web/20210903181442/https://www.merriam-webster.com/dictionary/holding%20company |archive-date=2021-09-03 |access-date=2021-09-03 |website=Dictionary by Merriam-Webster |language=en}}</ref> A holding company usually does not produce goods or services itself. Its purpose is to own [[Share capital|stock]] of other companies to create a [[corporate group]].

In some jurisdictions around the world, holding companies are called '''parent companies''', which, besides holding [[Share capital|stock]] in other companies, can conduct trade and other business activities themselves. Holding companies reduce [[risk]] for the [[shareholder]]s, and can permit the ownership and control of a number of different companies. ''[[The New York Times]]'' uses the term ''parent holding company''.<ref>{{cite news |last=Bedingfield |first=Robert E. |date=February 21, 1973 |title=C.&O. Acts to Broaden System And Form a Holding Company |newspaper=[[The New York Times]] |url=https://www.nytimes.com/1973/02/21/archives/co-acts-to-broaden-system-and-form-a-holding-company-expansion-is.html |url-status=live |access-date=6 May 2021 |archive-url=https://web.archive.org/web/20210506192054/https://www.nytimes.com/1973/02/21/archives/co-acts-to-broaden-system-and-form-a-holding-company-expansion-is.html |archive-date=6 May 2021}}</ref> Holding companies can be [[subsidiaries]] in a [[Subsidiary#Tiered subsidiaries|tiered structure]].

Holding companies are also created to hold [[assets]] such as [[intellectual property]] or [[trade secrets]], that are protected from the operating company. That creates a smaller risk when it comes to [[litigation]].

In the United States, 80% of stock, in voting and value, must be owned before [[tax consolidation]] benefits such as [[Dividends received deduction|tax-free]] [[dividend]]s can be claimed.<ref>I.R.C. § 1504(a); I.R.C. § 243(a)(3).</ref> That is, if Company A owns 80% or more of the stock of Company B, Company A will not pay [[taxes on dividends]] 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.<ref>{{cite news |last=Elliott |first=Stuart |date=December 8, 2010 |title=Retired Brands Bring Dollars and Memories-Advertising |newspaper=[[The New York Times]] |url=https://www.nytimes.com/2010/12/09/business/media/09adco.html |url-status=live |url-access=limited |access-date=6 May 2021 |archive-url=https://web.archive.org/web/20210506200058/https://www.nytimes.com/2010/12/09/business/media/09adco.html |archive-date=6 May 2021 |quote=owns a company called Brands USA Holdings}}</ref><ref>{{cite news |date=September 18, 1991 |title=Company News; Williams Holdings Makes Bid for Racal |newspaper=[[The New York Times]] |url=https://www.nytimes.com/1991/09/18/business/company-news-williams-holdings-makes-bid-for-racal.html |url-status=live |url-access=limited |access-date=6 May 2021 |archive-url=https://web.archive.org/web/20210506210053/https://www.nytimes.com/1991/09/18/business/company-news-williams-holdings-makes-bid-for-racal.html |archive-date=6 May 2021}}</ref>

==By country==
{{missing information|holding companies from the Netherlands|date=March 2023}}

===Australia===
The parent company–subsidiary company relationship is defined by Part 1.2, Division 6, Section 46 of the [[Corporations Act 2001|''Corporations Act 2001'' (Cth)]], which states:<ref>{{cite web |url=https://www.legislation.gov.au/Details/C2020C00093 |title=Corporations Act 2001 |website=Federal Register of Legislation|date=18 February 2020 }}</ref>

<blockquote>
A [[body corporate]] (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 [[general meeting]] 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.
</blockquote>

===Canada===
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."<ref>{{cite news |url=https://business.financialpost.com/legal-post/why-parent-companies-may-soon-be-unable-to-claim-immunity-from-their-subsidiarys-liabilities |title=Why parent companies may soon be unable to claim immunity from their subsidiary's liabilities |first=Julius |last=Melnitzer |date=25 June 2019 |website=[[Financial Post]] |url-status=live |access-date=6 May 2021 |archive-date=3 August 2019 |archive-url=https://web.archive.org/web/20190803152542/https://business.financialpost.com/legal-post/why-parent-companies-may-soon-be-unable-to-claim-immunity-from-their-subsidiarys-liabilities }}</ref>

===Singapore===
The parent subsidiary company relationship is defined by Part 1, Section 5, Subsection 1 of the Companies Act, which states:<ref>{{cite web |url=https://sso.agc.gov.sg/Act/CoA1967#pr5- |title=Companies Act |website=Singapore Statues Online |access-date=12 March 2020 |archive-url=https://web.archive.org/web/20190606040804/https://sso.agc.gov.sg/Act/CoA1967#pr5- |archive-date=6 June 2019 |url-status=live}}</ref>

<blockquote>
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
:::[Act 36 of 2014 wef 01/07/2015]
::(ii) controls more than half of the voting power of the first-mentioned corporation; or
::(iii) [Deleted 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
</blockquote>

===United Kingdom===
In the United Kingdom, 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.)<ref>{{cite book |url=https://ecgi.global/sites/default/files/working_papers/documents/SSRN-id2557680.pdf |title=Shareholders in the United Kingdom |author=P. Davies |date=January 2015 |publisher=ECGI |access-date=6 May 2021 |archive-date=6 May 2021 |archive-url=https://web.archive.org/web/20210506190216/https://ecgi.global/sites/default/files/working_papers/documents/SSRN-id2557680.pdf |url-status=live }}</ref><ref>{{cite book  |page=78
|title=The Political Economy of European Union
|author=Dermot McCann |year=2010
|publisher=Polity
|isbn=9780745638911
|url=https://books.google.com/books?id=BvcQ8YpdWGEC&pg=PA78}}</ref>

====Company law====
In the United Kingdom, the term ''holding company'' is defined by the [[Companies Act 2006]] at section 1159.<ref>{{cite web
|url=http://www.legislation.gov.uk/ukpga/2006/46/section/1159
|title=Companies Act 2006 - s.1159
|website=legislation.gov.uk
|access-date=2020-01-09
|archive-date=25 December 2019
|archive-url=https://web.archive.org/web/20191225150142/http://www.legislation.gov.uk/ukpga/2006/46/section/1159
|url-status=live
}}</ref> 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===

====Banking====
{{Further|Bank holding company}}
After the [[2008 financial crisis]], many U.S. investment banks converted to holding companies. According to the [[Federal Financial Institutions Examination Council]]'s website, [[JPMorgan Chase]], [[Bank of America]], [[Citigroup]], [[Wells Fargo]], and [[Goldman Sachs]] were the five largest bank holding companies in the finance sector, {{As of|2013|December|lc=y}}, based on total assets.<ref>{{cite web |date=June 30, 2014 |title=Holding Companies with Assets Greater Than $10 Billion |url=https://www.ffiec.gov/nicpubweb/nicweb/top50form.aspx |url-status= |archive-url=https://web.archive.org/web/20140413233457/https://www.ffiec.gov/nicpubweb/nicweb/Top50Form.aspx |archive-date=13 April 2014 |access-date=2014-11-28 |publisher=National Information Center}}</ref>

====Utilities====
The [[Public Utility Holding Company Act of 1935]] caused many energy companies to divest their subsidiary businesses. Between 1938 and 1958 the number of holding companies declined from 216 to 18.<ref>{{cite web |last=Hirsh |first=Richard |title=Documenting History in the Making |url=http://americanhistory.si.edu/csr/powering/ |url-status=dead |archive-url=https://web.archive.org/web/20120901160712/http://americanhistory.si.edu/csr/powering/ |archive-date=2012-09-01 |website=National Museum of American History}}</ref> [[Energy Policy Act of 2005|An energy law passed in 2005]] removed the 1935 requirements, and has led to mergers and holding company formation among power marketing and power brokering companies.<ref>{{cite web |title=Public vs. Private Power: from FDR to Today |url=https://www.pbs.org/wgbh/pages/frontline/shows/blackout/regulation/timeline.html#fn3 |url-status=live |archive-url=https://web.archive.org/web/20170908201754/http://www.pbs.org/wgbh/pages/frontline/shows/blackout/regulation/timeline.html#fn3 |archive-date=8 September 2017 |access-date=2014-11-28 |website=PBS}}</ref>

====Broadcasting====
{{Further|Media conglomerate}}
In US [[broadcasting]], many major [[media conglomerate]]s have purchased smaller broadcasters outright, but have not changed the [[broadcast license]]s to reflect this, resulting in stations that are (for example) still licensed to [[Jacor]] and [[Citicasters]], effectively making them such as subsidiary companies of their owner [[iHeartMedia]].  This is sometimes done on a per-[[media market|market]] basis. For example, in [[Atlanta]] both [[WNNX (FM)|WNNX]] and later [[WWWQ (FM)|WWWQ]] are licensed to "WNNX LiCo, Inc." (LiCo meaning "license company"), both owned by [[Susquehanna Radio]] (which was later sold to [[Cumulus Media]]).  In determining [[maximum|cap]]s to prevent excessive [[concentration of media ownership]], all of these are [[:wikt:attribute|attributed]] to the parent company, as are [[local marketing agreement|leased station]]s, as a matter of [[broadcast regulation]].

====Personal holding company====
In the United States, a personal holding company is defined in section&nbsp;542 of the [[Internal Revenue Code]]. A corporation is a personal holding company if both of the following requirements are met:<ref>{{cite news |last=Cuiffo |first=Donna-Marie |date=1993-08-01 |title=Our Greatest Hits {{!}} The Personal Holding Company Trap: Federal Taxation |work=The CPA Journal |publisher=The New York State Society of CPAs |url=https://www.cpajournal.com/2017/11/10/personal-holding-company-trap-federal-taxation/ |url-status=live |access-date=2017-12-06 |archive-url=https://web.archive.org/web/20190427012802/https://www.cpajournal.com/2017/11/10/personal-holding-company-trap-federal-taxation// |archive-date=27 April 2019}}</ref>
* 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 [[company]] that owns enough [[voting interest|voting power]] in another firm (or ''[[subsidiary]]'')
to control management and operations by influencing or electing its [[board of directors]].<ref name=":0">{{Cite web |title=Subsidiary {{!}} Definition, Meaning, Parent Company, & Holding Company |url=https://www.britannica.com/money/topic/subsidiary |access-date=2023-09-14 |website=Britannica Money  |language=en}}</ref> The definition of a parent company differs from [[jurisdiction]] to jurisdiction, with the definition normally being defined by way of [[Corporate law|laws dealing with companies]] 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.<ref name=":0" /> A parent company could simply be a company that wholly owns another company, which is then known as a "[[wholly owned subsidiary]]".

==See also==
{{Portal|Banks}}
* [[Berkshire Hathaway]]
* [[Chaebol]]
* [[Conglomerate (company)|Conglomerate]]
* [[Conglomerate discount]]
* [[Corporate group]]
* [[Investment company]]
* [[Keiretsu]]
* [[List of holding companies]]
* [[Multinational corporation]]
* [[Outline of management]]
* [[Patent holding company]]

==References==
{{Reflist}}

==External links==
* {{Commons category-inline|Holding companies}}
* [http://americanhistory.si.edu/powering/past/h1main.htm Emergence of Electrical Utilities in America] at Smithsonian Institution's [[National Museum of American History]]

{{Authority control}}

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[[Category:Business models]]
[[Category:Business terms]]
[[Category:Holding companies| ]]
[[Category:Legal entities]]
[[Category:Types of business entity]]