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Holding company - directorship

Holding company - directorship

Hi, this may be a slightly odd question but a fellow accountant friend asked me this a couple of days ago and I can't seem to find a conclusive answer. 

Company A owns 100% of the share capital in Company B.

Company B has a turnover of £250k and releases all of it's profits to Company A as dividends, there are no management charges or any other transactions between the two companies. 

Does Company A have to be a director in Company B for Company A to be classes as a holding company? If it does have to be a director does it have to be the sole director?

At present the directors/shareholders of Company A are also the directors of Company B.

Hope that is not too confusing, thank you for any help you can give.

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08th Mar 2016 08:01

A company is a subsidiary of another if that other company holds more than 50% of its issued share capital.

Being a director doesn't come into it.

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By DJKL
08th Mar 2016 12:31

Not sure after October (???)  that a company may be a director of another company, I think there was a change in the law in 2015 re this that is effective from October 2016.

The Small Business, Enterprise and Employment Act

https://www.gov.uk/government/news/the-small-business-enterprise-and-emp...

In addition if only one director I think it needed to be a natural person so a body corporate on its own would not have been sufficient. anyway.

Not my area of expertise. (Company law is boring!!!!)

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By Kevkava
08th Mar 2016 13:40

DJKL why is this relevant?

DKJL - why is this relevant? 'Company A owns 100% of the share capital in Company B'. A is B's holding company, full stop.

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By DJKL
08th Mar 2016 14:26

It is relevant because

Kevkava wrote:

DKJL - why is this relevant? 'Company A owns 100% of the share capital in Company B'. A is B's holding company, full stop.

It is relevant because the OP asks about one company being a director of another.

Whilst of course it is the shareholding which makes one the subsidiary and the other the holding company, so such a directorship is not required to create the holding/subsidiary relationship, John had already made this point,  given the OP mentioned it as a possible (holding company being a director of the subsidiary) I thought it worth  pointing out , certainly if  currently only one director, that such a relationship may already not be possible and certainly later this year will not be possible.

Just trying to be helpful; just because such a relationship not needed to create the holding/subsidiary relationship does not mean someone might not have set things up that way.

As I understand the Act I cited those companies who already have corporate directors ought to be reviewing this position this year in light of the change in the law.

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By Kevkava
08th Mar 2016 15:56

Thanks DKJL - your reasoning is impeccable, and I stand corrected.

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08th Mar 2016 15:57

UPDATE

Hi all,

Thank you for the responses - much appreciated as always. After a further discussion with my friend it turns out he was completely mistaken and had misread the paragraph below believing that by member they meant director:

 

"In order to qualify as a holding company, the Companies Act 2006 (sec. 1159) states that it will be considered the subsidiary of a holding company in the following circumstances:

The parent company holds greater than 50% of the voting rights in the subsidiary.The parent company is a member of the subsidiary and has the right to appoint or remove a majority of its board of directors.The parent company is a member of the subsidiary and, in accordance with an agreement with other shareholders, it alone controls a majority of the voting rights in the subsidiary.

Apologies for what now seems like a stupid question - thank you though for your thoughts.

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