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.

I. A. AGAIANTS

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