Subsidiary

A accessory company, subsidiary, or babe company1 is a aggregation that is absolutely or partly endemic and wholly controlled by addition aggregation that owns added than bisected of the subsidiary's stock.23 The accessory can be a company, corporation, or bound accountability company. In some cases it is a government or state-owned enterprise. The authoritative article is alleged its ancestor company, parent, or captivation company.4

An operating accessory is a business appellation frequently acclimated aural the United States railroad industry. In the case of a railroad, it refers to a aggregation that is a accessory but operates with its own identity, locomotives and rolling stock. In contrast, a non-operating accessory would abide on cardboard alone (i.e. stocks, bonds, online writing of incorporation) and would use the character and rolling banal of the ancestor company.

Subsidiaries are a accepted affection of business life, and all bunch corporations adapt their operations in this way5. Examples cover captivation companies such as Berkshire Hathaway as in this advertisement of its subsidiaries, Time Warner, or Citigroup; as able-bodied as added focused companies such as IBM, or Xerox Corporation. These, and others, adapt their businesses into civic and anatomic subsidiaries, oftentimes with assorted levels of subsidiaries.

Details

A ancestor aggregation does not accept to be the beyond or "more powerful" entity; it is accessible for the ancestor aggregation to be abate than a subsidiary,citation needed or the ancestor may be beyond than some or all of its subsidiaries (if it has added than one).citation needed The ancestor and the accessory do not necessarily accept to accomplish in the aforementioned locations, or accomplish the aforementioned businesses, but it is aswell accessible that they could conceivably be competitors in the marketplace. Also, because a ancestor aggregation and a accessory are abstracted entities, it is absolutely accessible for one of them to be circuitous in acknowledged proceedings, bankruptcy, tax delinquency, allegation and/or beneath investigation, while the added is not.

The a lot of accepted way that ascendancy of a accessory is achieved, is through the buying of shares in the accessory by the parent. These shares accord the ancestor the all-important votes to actuate the agreement of the lath of the subsidiary, and so exercise control. This gives acceleration to the accepted anticipation that 50% additional one allotment is abundant to actualize a subsidiary. There are, however, added means that ascendancy can appear about, and the exact rules both as to what ascendancy is needed, and how it is achieved, can be circuitous (see below). A accessory may itself accept subsidiaries, and these, in turn, may accept subsidiaries of their own. A ancestor and all its subsidiaries calm are alleged a "group", although this appellation can aswell administer to allied companies and their subsidiaries with capricious degrees of aggregate ownership.

Subsidiaries are separate, audible acknowledged entities for the purposes of taxation, regulation, and liability. For this reason, they adapt from divisions, which are businesses absolutely chip aural the capital company, and not accurately or contrarily audible from it.6

In added words, a accessory can sue and be sued alone from its parent, but its obligations will not commonly be the obligations of its parent. However, creditors of an bankrupt accessory may be able to access a acumen adjoin the ancestor if they can bore the accumulated blind and prove that the ancestor and accessory are simple adapt egos of one another.

Control

The chat "control" acclimated in the analogue of "subsidiary" is about taken to cover both applied and abstract control. Thus, advertence to a physique which "controls the composition" of addition body's lath is a advertence to ascendancy in principle, while advertence to getting able to casting added than bisected of the votes at a accepted meeting, whether accurately acknowledged or not, refers to abstract power. The actuality that a aggregation has a captivation of beneath than 50% additional one allotment which, because the backing of others are broadly dispersed, gives able ascendancy is not abundant to accord that aggregation 'control' for the purpose of free whether it is a subsidiary.citation needed

In Australia, for instance, the accounting standards authentic the affairs in which one article controls another.citation needed In accomplishing so, they abundantly alone the acknowledged ascendancy concepts in favour of a analogue that provides that 'control' is "the accommodation of an article to boss decision-making, anon or indirectly, in affiliation to the banking and operating behavior of addition article so as to accredit that added article to accomplish with it in advancing the objectives of the authoritative entity." This analogue was acclimatized in the Australian Corporations Act 2001: s 50AA.7 And aswell it can be a actual advantageous allotment of the aggregation that allows every arch of the aggregation to administer new projects and latest rules.

Business models which feature elements similar to subsidiaries

Conglomerate (company)

Chaebol

Zaibatsu

Keiretsu