Unit 11 - Groups of companies

Question 1

Discuss holding companies and subsidiaries.

Answer 1

• A holding company is the main company that owns a controlling interest in a subsidiary.
• The holding company owns the subsidiary directly (direct ownership).
• The holding company owns a subsidiary that, in turn, owns another company (indirect ownership).

Question 2

How does a holding company gain ownership ?

Answer 2

• By controlling more than half of the board members of the subsidiary.
• By owning more than 50% of the voting rights (51%).

Question 3

What is the difference between a wholly owned subsidiary and an ordinary
subsidiary ?

Answer 3

• A wholly owned subsidiary is when the holding company owns 100% of the subsidiary (either directly or indirectly).
• An ordinary subsidiary is when the holding company owns less than 100% of a subsidiary (but still has control, typically 51%).