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Related to Subsidaries: Wholly owned subsidiaries


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 ?
It said a Swedish company which had taken on outsourced services of one of its subsidaries was wrong to treat the work as tax exempt.
Nasdaq: ESLR), a manufacturer of solar power products with its proprietary, low-cost String Ribbon[TM] wafer technology, today announced that it has entered into a four-year supply contract with Mainstream Energy, LLC, which has systems integration and distribution subsidaries involved in the sales, distribution and installation of residential and commercial solar electric systems nationwide.
Tenders are invited for Appointment Of Third Party For Coal Sampling And Analysis By Ntpc-Mouda At Loading End (Mines) And Un-Loading End For The Coal Supplied By Cil Subsidaries.
Contract notice: Purchase of microsoft solutions for the group eurotunnel and its subsidaries.
These include the company's existing subsidaries, as well as future acquisitions and development of existing businesses that further serve to enhance the company's business operations.
Devon & Cornwall Housing Limited (DCH) is the lead partner of Frameworks South West (FSW), an umbrella organisation for a number of housing associations (and their subsidaries, where appropriate), all who provide quality affordable housing in the South West.
These include the company's existing subsidaries as well as future acquisitions of existing businesses that further serve to enhance the company's business operations.