Parent company

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A parent company is a company that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors; the second company being deemed as a subsidiary of the parent company. The definition of a parent company differs by jurisdiction, with the definition normally being defined by way of laws dealing with companies in that jurisdiction.

Definitions from around the world[edit]

Australia[edit]

The parent company-subsidiary company relationship is defined by Part 1.2, Division 6, Section 46 of the Corporations Act 2001 (Cth), which states:[1]

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.

Singapore[edit]

The parent company-subsidiary company relationship is defined by Part 1, Section 5, Subsection 1 of the Companies Act, which states:[2]

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;
(ii) controls more than half of the voting power of the first-mentioned corporation; or
(iii) holds more than half of the issued share capital of the first-mentioned corporation (excluding any part thereof which consists of preference shares and treasury shares); or
(b) the first-mentioned corporation is a subsidiary of any corporation which is that other corporation’s subsidiary.

See also[edit]

References[edit]

  1. ^ "CORPORATIONS ACT 2001 - SECT 46". AustLII. Retrieved 2008-05-30. 
  2. ^ "Definition of subsidiary and holding company". Singapore Statutes Online. Retrieved 2008-05-30.