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 from jurisdiction to jurisdiction, with the definition normally being defined by way of laws dealing with companies in that jurisdiction.
Definitions from around the world
- (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.
The parent company-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;
- (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.
In the UK 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, then the held company is seen to have ceased to operate as an independent entity and become a trading 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.)
- ^ "CORPORATIONS ACT 2001 - SECT 46". AustLII. http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s46.html. Retrieved 2008-05-30.
- ^ "Definition of subsidiary and holding company". Singapore Statutes Online. http://statutes.agc.gov.sg/non_version/cgi-bin/cgi_getdata.pl?actno=2006-REVED-50&doctitle=COMPANIES%20ACT%0a&date=latest&method=part&sl=1&segid=1162543710-000060#1162543711-000913. Retrieved 2008-05-30.
- (a) the other body:
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Look at other dictionaries:
parent company — A company may own one or more other companies which are its subsidiaries. The relationship between parent and subsidiary depends on majority control of the voting rights of shares or the ability to appoint the majority of directors. The precise… … Law dictionary
parent company — or corporation Company owning more than 50 percent of the voting shares, or otherwise a controlling interest, of another company, called the subsidiary Compare holding company … Black's law dictionary
parent company — parent .company n a company that controls a smaller company or organization … Dictionary of contemporary English
parent company — parent ,company noun count BUSINESS a company or organization that owns or controls a smaller company or organization of the same type … Usage of the words and phrases in modern English
parent company — a corporation or other business enterprise that owns controlling interests in one or more subsidiary companies (distinguished from holding company). [1865 70] * * * parent company noun A company that holds the majority of the shares of another… … Useful english dictionary
parent company — A company that controls subsidiaries ( subsidiary) through its ownership of voting stock, as well as runs its own business. Bloomberg Financial Dictionary * * * parent company parent company ➔ company * * * parent company UK US noun [C] (also… … Financial and business terms
parent company — UK / US noun [countable] Word forms parent company : singular parent company plural parent companies business a company or organization that owns or controls a smaller company or organization of the same type … English dictionary
parent company — parent undertaking See holding company … Big dictionary of business and management
parent company — company which controls one or more secondary companies (secondary companies are called daughter companies) … English contemporary dictionary
parent company — /ˈpɛərənt kʌmpəni/ (say pairruhnt kumpuhnee) noun (plural parent companies) a company which controls another company or group of companies by virtue of owning enough stock to control the management of the subsidiary companies … Australian English dictionary