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A holding company is a company whose primary business is holding a controlling interest in the securities of other companies. [1] A holding company usually does not produce goods or services itself. Its purpose is to own stock of other companies to form a corporate group .
A subsidiary, subsidiary company, or daughter company [1] [2] [3] is a company completely or partially owned or controlled by another company, called the parent company or holding company, which has legal and financial control over the subsidiary company.
When a bank holding company owns a subsidiary bank, it handles management of the bank, which in turn provides financial products and services to consumers and businesses.
A corporate group is composed of companies. The general rule is that a company is a separate legal entity from its shareholders, that is the shareholder's liability for the subsidiary's debts is limited to the value of the shares, [3] and the shareholders cannot be required to perform the company's obligations.
A non-operating subsidiary, in contrast, is a subsidiary that exists on paper, but does not have any assets or employees of its own and therefore cannot function independently as a going business concern. Thus, its only actual business "operations" may consist of its officers entering into contracts with other corporate entities (which may or ...
A company or firm in which the holding company owns a significant portion of voting shares, usually 20–50% or a "minority of share ownership", is known as an associate company. A company in which the holding company owns more than 50% voting shares or a "majority of share ownership" is known as a subsidiary. The holding company thus can also ...
In the United States, a bank holding company, as provided by the Bank Holding Company Act of 1956 (12 U.S.C. § 1841 et seq.), is broadly defined as "any company that has control over a bank". [2] All bank holding companies in the US are required to register with the Board of Governors of the Federal Reserve System .
A prominent example is the bank holding company Bank of America Corporation, whose bank subsidiary, Bank of America, N.A., offers bank services and products, while such non-bank subsidiaries as Banc of America Investment Services, Inc. and Banc of America Securities, as well as Banc of America Insurance Services, Inc., offer investment ...