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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.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.


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.
Collins Dictionary of Law © W.J. Stewart, 2006
References in periodicals archive ?
On the other hand, the Panels of the Pyunik Yerevan case and the Soto case both held that Swiss law would apply "additionally" or "subsidiarily".
As we subsidiarily indwell the particulars of a person's face in order to form a focal image of it, we are projecting from and through that multitude of particulars to the focal image we are explicitly recognizing as that person's face.
Subsidiarily, these internal processes warrant survival of the fittest against natural selection more rapidly and more efficiently than the random mutations invoked by Darwinist theories.
Of particular importance is the Catholic principle of subsidiarily, the notion that it is "a grave evil and a disturbance of right order for a larger and higher organization to arrogate to itself functions which can be performed efficiently by smaller and lower bodies" (p.
Amazingly, one of my hopes is subsidiarily. This is a word invented not by Jacques Delors but by Pope Leo X who basically said: "If you can do it in the family, don't let the state have a role".
While the background is perceived subsidiarily, we are focally aware of the object of perception.
- In an award rendered on 11 September 2008 with regard to a Brazilian football player (7), the panel held that the FIFA rules, in particular the FDC, were primarily applicable, the rules of the Confederacao Brasileira de Futebol (CBF) being applicable subsidiarily. The panel relied on Brazilian law, which imposed on Brazilian sport federations and athletes the adherence to international sport rules.
The papacy, nevertheless, remains a serious obstacle, one that can be overcome only by a new praxis that observes the principle of subsidiarily. No explanations of papal rule can overcome this obstacle to unity as long as such practices as Rome's naming and deposing of bishops are continued.
Although CST contains a number of interesting doctrines, the most important one is subsidiarily, which serves as a unifying theme throughout the book.
Catholic social teaching sees the principle of subsidiarily as applicable to the different forms of social organization.