(redirected from subsidiary company)
Also found in: Dictionary, Thesaurus, Financial, Wikipedia.
Related to subsidiary company: consolidated balance sheet


Auxiliary; aiding or supporting in an inferior capacity or position. In the law of corporations, a corporation or company owned by another corporation that controls at least a majority of the shares.

A subsidiary corporation or company is one in which another, generally larger, corporation, known as the parent corporation, owns all or at least a majority of the shares. As the owner of the subsidiary, the parent corporation may control the activities of the subsidiary. This arrangement differs from a merger, in which a corporation purchases another company and dissolves the purchased company's organizational structure and identity.

Subsidiaries can be formed in different ways and for various reasons. A corporation can form a subsidiary either by purchasing a controlling interest in an existing company or by creating the company itself. When a corporation acquires an existing company, forming a subsidiary can be preferable to a merger because the parent corporation can acquire a controlling interest with a smaller investment than a merger would require. In addition, the approval of the stockholders of the acquired firm is not required as it would be in the case of a merger.

When a company is purchased, the parent corporation may determine that the acquired company's name recognition in the market merits making it a subsidiary rather than merging it with the parent. A subsidiary may also produce goods or services that are completely different from those produced by the parent corporation. In that case it would not make sense to merge the operations.Corporations that operate in more than one country often find it useful or necessary to create subsidiaries. For example, a multinational corporation may create a subsidiary in a country to obtain favorable tax treatment, or a country may require multinational corporations to establish local subsidiaries in order to do business there.

Corporations also create subsidiaries for the specific purpose of limiting their liability in connection with a risky new business. The parent and subsidiary remain separate legal entities, and the obligations of one are separate from those of the other. Nevertheless, if a subsidiary becomes financially insecure, the parent corporation is often sued by creditors. In some instances courts will hold the parent corporation liable, but generally the separation of corporate identities immunizes the parent corporation from financial responsibility for the subsidiary's liabilities.

One disadvantage of the parent-subsidiary relationship is the possibility of multiple taxation. Another is the duty of the parent corporation to promote the subsidiary's corporate interests, to act in its best interest, and to maintain a separate corporate identity. If the parent fails to meet these requirements, the courts will perceive the subsidiary as merely a business conduit for the parent, and the two corporations will be viewed as one entity for liability purposes.


Mergers and Acquisitions; Parent Company.


noun adjuvant, aiding, assistant, cooperating, helping, secondary, subordinate, subsidiarius, supplemental, supplementary
Associated concepts: subsidiary corporation
See also: appurtenance, appurtenant, chapter, circumstantial, contingent, derivative, extraneous, extrinsic, incident, incidental, inferior, minor, organ, pendent, secondary, slight, subaltern, subordinate, subservient, supplementary


a company is a subsidiary of another company if the second company (the parent) owns more than 50 per cent of the ordinary share capital of the first company or otherwise has voting control over it.
References in periodicals archive ?
Since Singapore subsidiary company is given the status of a local/resident company.
If the subsidiary company meets the requirements of tax residency, they can qualify for certain tax benefits.
and its wholly owned subsidiary Company, Copperstone Mining Limited will now be in a position to develop and progress its Gold Mining Exploration activities on its various claims.
and its wholly owned subsidiary Company, Ambassador Gold Limited will now be in a position to develop and progress its Gold Mining Exploration activities on its various claims.
OTCBB: XRYM will receive a dividend share of each subsidiary Company based on a percentage of shares of XRYM owned as of November 4th 2005, and such shares will be issued to each XRYM shareholder on November 7th, 2005.
AMEX:TKO), the leader in providing powerline carrier (PLC) networking solutions using existing electrical wiring, today announced a strategic partnership to integrate Telkonet's Powerline Communications (PLC) technology into multi-dwelling and multi-tenant networks developed and operated by IDACOMM, a subsidiary company of Boise-based IDACORP, Inc.
This approach will facilitate a wider distribution of subsidiary company software and IT applications as Blue Port builds a stable of operating subsidiaries.
OTCBB:SSWM), announced that its Mexican subsidiary company Environmental Tec International, S.
SSWM and its Mexican subsidiary company ETI is capitalizing on its licensed patented technologies registered in Mexico with SEMARNAT a Federal regulatory agency overseeing environmental compliance nationwide.