holding company

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holding company:

see corporationcorporation,
in law, organization enjoying legal personality for the purpose of carrying on certain activities. Most corporations are businesses for profit; they are usually organized by three or more subscribers who raise capital for the corporate activities by selling shares
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Holding Company


a company that owns a controlling portion of the stock of other companies for the purpose of controlling and managing their operations.

There are two types of holding company: the pure holding company, which confines its functions to the holding of interests in other companies, and the mixed holding company, which in addition carries on its own operations in such areas as industry, trade, transportation, and finance. The holding company is an integral part of the holding system. Holding companies head trusts and large concerns in all capitalist countries; some monopolies, primarily multinational monopolies, are headed by a system of holding companies. The British and Dutch petroleum monopoly Royal Dutch-Shell, for example, is controlled by two holding companies: the British firm Shell Transport and Trading and the Dutch firm Royal Dutch Petroleum. These two corporations own shares in two other holding companies: Shell UK, Ltd., in Great Britain and Shell Petroleum N. V. in the Netherlands, which together own or hold shares in more than 500 companies, either directly or through their subsidiaries. Unilever, a British and Dutch trust that manufactures food products, soap, and perfume, has a similar complex structure.

Holding companies, which may simultaneously comprise such firms as industrial concerns, commercial banks, and insurance companies, represent one of the organizational forms of the financial oligarchy. An example of such an organizational structure is provided by two banks of the Federal Republic of Germany—Deutsche Bank and Dresdner Bank—and the Belgian bank Société Générale de Belgique, which head financial groups of the same names. On the average, each of these banks owns shares in and controls the operations of 150 companies, including finance, investment, insurance, commercial, industrial, and transportation companies and companies in the service sector.

Trusts and large concerns make extensive use of holding companies in their internal organizational structure; by this means they control and direct groups of subsidiaries, which are classified by a distinguishing feature, such as location, economic sector, or commercial activity. For example, Exxon, the largest petroleum monopoly in the capitalist world, includes approximately ten holding companies, which head subsidiaries operating in such areas as Africa and the Middle East. Monopolies often create such holding companies in countries with low tax rates in an effort to maximize profits.

The development of holding companies marks an intensification in the concentration of production and capital, since it fosters the subordination of small and medium-sized companies to large corporations.


References in periodicals archive ?
The Boards of Directors of the Parent Companies have unanimously agreed to recommend that the shareholders accept the Offers.
Since 1996 the activities of the Parent Companies consist only in managing their respective shares of the SAS Consortium.
Under the current share structure, the Parent Companies constitute independent companies vis-a-vis one another, charged inter alia with the task of protecting their own interests in the SAS Consortium.
Through the Offers, the current shareholders in the Parent Companies will become shareholders in SAS AB.
The functions to be performed by the Parent Companies mainly consist of tasks related to their ownership of the SAS Consortium.
A prospectus containing complete information on the Offers as well as a notification form for participants is expected to be distributed to the shareholders in the Parent Companies at the end of May 2001.
In the new Group, SAS's liabilities to the Parent Companies will become only an internal item.
The main reason is that the current SAS Group paid out to the Parent Companies only as much as was needed to cover dividends and taxes payable (as well as the Companies' current minor expenses).