holding company

holding company
a company that controls other companies through stock ownership but that usually does not engage directly in their productive operations (distinguished from parent company).
[1905-10]

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Corporation that owns enough voting stock in one or more other companies to exercise control over them.

A holding company provides a means of concentrating control of several companies with a minimum of investment; other means of gaining control, such as mergers or consolidations, are more complicated legally and more expensive. A holding company can reap the benefits of a subsidiary's goodwill and reputation while limiting its liability to the proportion of the subsidiary's stock that it owns. The parent company in a conglomerate corporation is usually a holding company.

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      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, while one that also engages in a business of its own is called a holding-operating company. A holding company typically owns a majority of stock in a subsidiary, but if ownership of the remaining shares is widely diffused, even minority ownership may suffice to give the holding company control. A holding company provides a means of concentrating control of several companies with a minimum amount of investment. The use of a holding company is legally simpler and less expensive than other means of gaining control of another company, such as merger or consolidation. A holding company is able to reap the benefits of a subsidiary's goodwill and reputation, yet its liability is limited to the proportion of the subsidiary's stock that it owns. These and other factors make holding companies an effective form of organization on both national and international levels. The parent company in a conglomerate corporation is usually a holding company.

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Universalium. 2010.

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