Subsidiary

A subsidiary, subsidiary company or daughter company[1][2][3] is a company that is owned or controlled by another company, which is called the parent company, parent, or holding company.[4][5] The subsidiary can be a company, corporation, or limited liability company. In some cases it is a government or state-owned enterprise. In some cases, particularly in the music and book publishing industries, subsidiaries are referred to as imprints.

In the United States railroad industry, an operating subsidiary is a company that is a subsidiary but operates with its own identity, locomotives and rolling stock. In contrast, a non-operating subsidiary would exist on paper only (i.e., stocks, bonds, articles of incorporation) and would use the identity of the parent company.

Subsidiaries are a common feature of business life, and most multinational corporations organize their operations in this way.[6] Examples include holding companies such as Berkshire Hathaway,[7] Jefferies Financial Group, WarnerMedia, or Citigroup; as well as more focused companies such as IBM or Xerox. These, and others, organize their businesses into national and functional subsidiaries, often with multiple levels of subsidiaries.

Details

Subsidiaries are separate, distinct legal entities for the purposes of taxation, regulation and liability. For this reason, they differ from divisions, which are businesses fully integrated within the main company, and not legally or otherwise distinct from it.[8] In other words, a subsidiary can sue and be sued separately from its parent and its obligations will not normally be the obligations of its parent. However, creditors of an insolvent subsidiary may be able to obtain a judgment against the parent if they can pierce the corporate veil and prove that the parent and subsidiary are mere alter egos of one another, therefore any copyrights trademarks and patents remain with the subsidiary until the parent shuts down the subsidiary.

One of the ways of controlling a subsidiary is achieved is through the ownership of shares in the subsidiary by the parent. These shares give the parent the necessary votes to determine the composition of the board of the subsidiary, and so exercise control. This gives rise to the common presumption that 50% plus one share is enough to create a subsidiary. There are, however, other ways that control can come about, and the exact rules both as to what control is needed, and how it is achieved, can be complex (see below). A subsidiary may itself have subsidiaries, and these, in turn, may have subsidiaries of their own. A parent and all its subsidiaries together are called a corporate group, although this term can also apply to cooperating companies and their subsidiaries with varying degrees of shared ownership.

A parent company does not have to be the larger or "more powerful" entity; it is possible for the parent company to be smaller than a subsidiary, such as DanJaq, a closely held family company, which controls Eon Productions, the large corporation which manages the James Bond franchise. Conversely, the parent may be larger than some or all of its subsidiaries (if it has more than one), as the relationship is defined by control of ownership shares, not the number of employees.

The parent and the subsidiary do not necessarily have to operate in the same locations or operate the same businesses. Not only is it possible that they could conceivably be competitors in the marketplace, but such arrangements happen frequently at the end of a hostile takeover or voluntary merger. Also, because a parent company and a subsidiary are separate entities, it is entirely possible for one of them to be involved in legal proceedings, bankruptcy, tax delinquency, indictment or under investigation while the other is not.

Other Languages
العربية: شركة تابعة
asturianu: Filial
bosanski: Podružnica
català: Filial
español: Filial
Esperanto: Filio
euskara: Filial
français: Filiale
한국어: 자회사
Ido: Filialo
Bahasa Indonesia: Anak perusahaan
עברית: חברה בת
Bahasa Melayu: Anak syarikat
Nederlands: Dochteronderneming
日本語: 子会社
português: Subsidiária
română: Filială
Scots: Subsidiary
Simple English: Subsidiary
svenska: Dotterbolag
Türkçe: Yan kuruluş
Tiếng Việt: Công ty lép vốn
中文: 子公司