A holding company is a corporation that owns enough voting stock in one or more other companies to exert control, often used for risk management and capital raising. Historically, holding companies gained popularity after World War I and have since been vital in forming multinational corporations, though they may also create monopolies and inequalities. Examples include Berkshire Hathaway and Coal India, with associated advantages and disadvantages outlined for both holding companies and their subsidiaries.

1. HOLDING & SUBSIDARY
COMPANY
BEENA EDWARD
BCOM ( REG)

2. HOLDING COMPANY
A “Holding company” is a corporation that owns enough
voting stock in one or more other companies to exercise
control over them. A corporation that exists solely for this
purpose is called a pure holding company.
Holding companies that control 80% or more of the
subsidiary's voting stock gain the benefits of tax
consolidation, which include tax-free dividends for the
parent company .

3. In the United States, Berkshire Hathaway is the largest
publicly traded holding company
The company wholly owns GEICO, BNSF, Lubrizol, Dairy
Queen, Fruit of the Loom, Helzberg Diamonds and Net Jets,
owns half of Heinz, owns an undisclosed percentage of Mars,
Incorporated and has significant minority holdings in
American Express, The Coca-Cola Company, Wells Fargo, and
IBM.

4. History
• The first holding company was organized by John D.
Rockefeller as a trust in Ohio, the Standard Oil Trust.
The term trust was the immediate predecessor of the
term holding company although its aims were the same
• Ordinarily, holding companies are organized as
acquisition vehicles so that other companies may be
brought under the same control.
• They began to grow after World War I as many
companies began to expand.

5. History
• In certain industries, holding companies have been
regulated-The PUBLIC UTILITY HOLDING COMPANY
ACT (1935) and the BANK HOLDING COMPANY ACT
(1956)
• By the 1960s, the holding company was the predominant
form of industrial organization used by large companies,
since many were multinational, and the holding
company was used to establish foreign subsidiaries and
other international operations.

6. Advantages
 Holding companies can take risks through subsidiaries, and limit
this risk to the subsidiary alone rather than placing the parent
company on the line
 The holding company also benefits from the subsidiary's goodwill
and reputation, while being sheltered from risks faced by the
subsidiary in the case of legal issues, tax liabilities and lawsuits.
 When raising capital a larger holding company has more diversity of
assets than an individual company, which makes raising capital
easier.

7. Advantages
 The holding company generally produces no products or services
and is simply a vehicle for owning shares of other companies. If the
holding company owns 80 percent of the voting stock of another
company (the subsidiary), the holding company can qualify for tax-
free dividends.
 Foreign Capital: The holding company may also attract the foreign
capital for the expansion of a business.
 The holding company eliminates competition due to centralized
control over the subsidiary companies, so it earns maximum profit.

8. Disadvantages
 Problem of Monopoly: A holding company tries to create
monopoly over the market. Monopoly is always against the public
interest. It fixes higher prices and consumer suffers a loss.
 Unequal Distribution of Wealth: Due to holding companies
wealth goes in few hands and society is divided into two classes, rich
and poor. Rich class enjoys all the amenities of life while poor class
faces poverty and hunger.
 Costly Management: A holding company spends a lot of money
on the officers and offices. All the units are managed by the central
authority. So it is costly to maintain the proper control on large
number subsidiary companies.

9. Disadvantages
 Minority Interest Ignored: The interest of the minority
shareholders is ignored and the members of the holding company
dispose of every resolution for their own interest.
 Misuse of Funds: The directors of the company enjoys
unlimited powers and they take undue advantages.

10. Top Holding companies - GLOBAL

11. Holding companies in INDIA

12. What is subsidiary company?
If company A holds more than 50% Shares of company B then;
Company A is a holding company
Company B is a subsidiary company
Example: Coal India is a holding company.
Bharat Coking ltd, Mahanadi Coal Fields ltd are its
subsidiary companies.

13. Subsidiary company
A subsidiary company, subsidiary, or sister
company is a company that is completely or partly owned
and partly or wholly controlled by another company that
owns more than half of the subsidiary's stock . The
subsidiary can be a company, corporation or limited
liability company

14. Advantages
 The holding company provides the subsidiary company
with buying power, research and development funds,
marketing money and know-how, employees, technical
expertise and other features which otherwise it could not
afford or accomplish alone.
 The parent can provide the monetary means and
capability to jump start new companies and products.
 Ability to offset profits and losses of one part of a
business with another

15. Advantages
 Liabilities and credit claims are locked in that subsidiary
and cannot be passed on to the parent company
 Allows for joint ventures with other companies with each
owning a portion of the new business operation.

16. Disadvantages
 A major disadvantage of being a subsidiary of a large
organization is the limited freedom in management
 Decision making can become time consuming as issues
often must go through various chains of command within
the parent bureaucracy before any action can be taken
 Legal paperwork involved with creating a subsidiary can be
lengthy and expensive
 Control also becomes an issue when a subsidiary is
partially owned by another outside organization

17. Holding Vs. Subsidiary
 When a company acquires majority shares in another
company, it becomes a holding company and the
company whose share it acquires becomes a subsidiary
company.
 The relationship between the holding and subsidiary
company is that of a parent and child.
 Many companies are formed with the sole intent of
becoming holding companies.

18. Companies bearing the TATA label

19. Subsidiaries without the TATA Label