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Holding company vs parent company

ok before i get any mean replies let me explain that this is only my second week in the job.

last week i was on audit at a clients and wanted to know the difference between a parent company and a holding company but no one in our office can tell me

can someone point me in the right direction please?

also does a parent or holding company have to hold shares in its associated companies?

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No practical difference

A holding company is, by definition, a parent company.

A parent company is simply a company, trading or otherwise, that holds the majority of shares in another company.

Having said that, the term 'parent' crops up in certain parts of the legislation in the context, for example, of accounting for companies and their subsidiaries (also as specifically defined).

The term 'holding company' is normally used in respect of a company set up for the sole purpose of holding shares in other companies, usually to facilitate formation of groups and reorganisations. ie they tend not to have any business of their own, but there is nothing to prevent them doing so.

In short, 'parent' can be a legal definition, and 'holding company' usually infers a non-active parent but in the general sense the terms are interchangeable.

PC

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Thanks

so if there are 3 companys all with a shared share holder is one of those companies the parent company?

 

what happens if the shareholder refers to one company as the parent company even though it doesnt own shares in the other companies? ....is this allowed?

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Sorry

I can't follow that second question

PC

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Sorry .... I can't resist ... No one in your firm can tell you?

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Going back to the second question

Are you suggesting, for example, that a person A has 100% of the shares in each of companies 1,  2 and 3? If so, there is no parent company. As already indicated a parent company is a company that holds the majority of shares in another company. In this example, individual A would be the 'parent' of all 3 companies, though one does not generally describe individuals as being parents - except of children.

PC

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