Holding Company, one which controls the activities of others by acquiring all or most of their shares. It may form a subsidiary company for the purpose or acquire an existing company by buying the shares for cash or giving its shares in exchange.
Most of the large public companies in the U.K. are holding companies with many subsidiaries, and there is an increasing tendency for companies to form large groups in many industries. A subsidiary usually deals with one part of the industry or trade in which the group operates. Overseas subsidiaries are formed to look alter the group's interests in a single country or continent. Subsidiaries may be given a larger or smaller degree of autonomy. Under the Companies Act, 2008, the holding company most publish consolidated accounts covering the whole group.
A holding company does not always hold the whole of the shares in the subsidiary; there is often a minority interest of outside shareholders. In take-over bids the majority of the shares of a company are acquired by another, which may become the holding company. Shareholders are offered shares in the holding company and/or cash in exchange for their own shares. The companies taken over are considered potentially more profitable either because their properties and other assets are not being fully employed or because economies could be made through amalgamation or competition reduced.
Examples Economic Crisis - Recent Economic Crisis
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