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A parent company is a company that owns enough voting stock in another firm to control management and operation by influencing or electing its board of directors. Companies that operate under this management are deemed subsidiaries of the parent company.
The parent company–subsidiary company relationship is defined by Part 1.2, Division 6, Section 46 of the Corporations Act 2001 (Cth), which states:
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.
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.”
The parent subsidiary company relationship is defined by Part 1, Section 5, Subsection 1 of the Companies Act, which states:
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
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In the United Kingdom, it 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.)
A board of directors is a group of people who jointly supervise the activities of an organization, which can be either a for-profit business, nonprofit organization, or a government agency. Such a board's powers, duties, and responsibilities are determined by government regulations and the organization's own constitution and bylaws. These authorities may specify the number of members of the board, how they are to be chosen, and how often they are to meet.
In business, a takeover is the purchase of one company by another. In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to the acquisition of a private company.
A holding company is a company that owns the outstanding stock of other companies. A holding company usually does not produce goods or services itself. Its purpose is to own shares of other companies to form a corporate group. However, in many jurisdictions around the world, holding companies are usually called parent companies, which, besides holding stock in other companies, can conduct trade and other business activities themselves. Holding companies reduce risk for the shareholders, and can permit the ownership and control of a number of different companies.
A shareholder is an individual or institution that legally owns one or more shares of stock in a public or private corporation. Shareholders may be referred to as members of a corporation. By law, a person is not a shareholder in a corporation until their name and other details are entered in the corporation's register of shareholders or members.
Power Corporation of Canada is an international management and holding company that focuses on financial services in North America, Europe and Asia. Its core holdings are leading insurance, retirement, wealth management and investment businesses, including a portfolio of alternative asset investment platforms.
A subsidiary, subsidiary company or daughter company is a company that is owned or controlled by another company, which is called the parent company, parent, or holding company. The subsidiary can be a company, corporation, or limited liability company. In some cases it is a government or state-owned enterprise.
Controlled foreign corporation (CFC) rules are features of an income tax system designed to limit artificial deferral of tax by using offshore low taxed entities. The rules are needed only with respect to income of an entity that is not currently taxed to the owners of the entity. Generally, certain classes of taxpayers must include in their income currently certain amounts earned by foreign entities they or related persons control.
Corporate law is the body of law governing the rights, relations, and conduct of persons, companies, organizations and businesses. The term refers to the legal practice of law relating to corporations, or to the theory of corporations. Corporate law often describes the law relating to matters which derive directly from the life-cycle of a corporation. It thus encompasses the formation, funding, governance, and death of a corporation.
In accounting, minority interest is the portion of a subsidiary corporation's stock that is not owned by the parent corporation. The magnitude of the minority interest in the subsidiary company is generally less than 50% of outstanding shares, or the corporation would generally cease to be a subsidiary of the parent.
A proxy fight, proxy contest or proxy battle, sometimes also called a proxy war, is an unfriendly contest for the control over an organization. The event usually occurs when a corporation's stockholders develop opposition to some aspect of the corporate governance, often focusing on directorial and management positions. Corporate activists may attempt to persuade shareholders to use their proxy votes to install new management for any of a variety of reasons. Shareholders of a public corporation may appoint an agent to attend shareholder meetings and vote on their behalf. That agent is the shareholder's proxy.
The engine of Japanese economic growth has been private initiative and enterprise, together with strong support and guidance from the government and from labor. The most numerous enterprises were single proprietorships, of which there were more than 4 million in the late 1980s. The dominant form of organization; however, is the Corporation. In 1988 some 2 million corporations employed more than 30 million workers, or nearly half of the total labor force of 60.1 million people. Corporations range from large to small, but the favored type of organization is the joint-stock company, with directors, auditors, and yearly stockholders' meetings.
The Supreme Court of Delaware is the sole appellate court in the United States' state of Delaware. Because Delaware is a popular haven for corporations, the Court has developed a worldwide reputation as a respected source of corporate law decisions, particularly in the area of mergers and acquisitions.
A company, abbreviated as co., is a legal entity representing an association of people, whether natural, legal, or a mixture of both, with a specific objective. Company members share a common purpose and unite to achieve specific, declared goals. Companies take various forms, such as:
A corporate group or group of companies is a collection of parent and subsidiary corporations that function as a single economic entity through a common source of control. The concept of a group is frequently used in tax law, accounting and company law to attribute the rights and duties of one member of the group to another or the whole. If the corporations are engaged in entirely different businesses, the group is called a conglomerate. The forming of corporate groups usually involves consolidation via mergers and acquisitions, although the group concept focuses on the instances in which the merged and acquired corporate entities remain in existence rather than the instances in which they are dissolved by the parent. The group may be owned by a holding company which may have no actual operations.
A squeeze-out or squeezeout, sometimes synonymous with freeze-out (freezeout), is the compulsory sale of the shares of minority shareholders of a joint-stock company for which they receive a fair cash compensation.
The Companies Act 2006 is an Act of the Parliament of the United Kingdom which forms the primary source of UK company law. It had the distinction of being the longest Act in British Parliamentary history: with 1,300 sections and covering nearly 700 pages, and containing 16 schedules but it has since been surpassed, in that respect, by the Corporation Tax Act 2009.
The United Kingdom company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary legal vehicle to organise and run business. Tracing their modern history to the late Industrial Revolution, public companies now employ more people and generate more of wealth in the United Kingdom economy than any other form of organisation. The United Kingdom was the first country to draft modern corporation statutes, where through a simple registration procedure any investors could incorporate, limit liability to their commercial creditors in the event of business insolvency, and where management was delegated to a centralised board of directors. An influential model within Europe, the Commonwealth and as an international standard setter, UK law has always given people broad freedom to design the internal company rules, so long as the mandatory minimum rights of investors under its legislation are complied with.
Porsche Automobil Holding SE, usually shortened to Porsche SE, is a German holding company with investments in the automotive industry. Porsche SE is headquartered in Zuffenhausen, a city district of Stuttgart, Baden-Württemberg and is majority owned, but fully controlled, by the Austrian Porsche and Piëch families. The company was founded in Stuttgart as Dr. Ing. h.c. F. Porsche GmbH in 1931 by Ferdinand Porsche (1875–1951) and his son-in-law Anton Piëch (1894–1952).
Australian corporations law has historically borrowed heavily from UK company law. Its legal structure now consists of a single, national statute, the Corporations Act 2001. The statute is administered by a single national regulatory authority, the Australian Securities and Investments Commission (ASIC).
United States corporate law regulates the governance, finance and power of corporations in US law. Every state and territory has its own basic corporate code, while federal law creates minimum standards for trade in company shares and governance rights, found mostly in the Securities Act of 1933 and the Securities and Exchange Act of 1934, as amended by laws like the Sarbanes–Oxley Act of 2002 and the Dodd–Frank Wall Street Reform and Consumer Protection Act. The US Constitution was interpreted by the US Supreme Court to allow corporations to incorporate in the state of their choice, regardless of where their headquarters are. Over the 20th century, most major corporations incorporated under the Delaware General Corporation Law, which offered lower corporate taxes, fewer shareholder rights against directors, and developed a specialized court and legal profession. Nevada has done the same. Twenty-four states follow the Model Business Corporation Act, while New York and California are important due to their size.