Subsidiary

AAA

DEFINITION of 'Subsidiary'

A company whose voting stock is more than 50% controlled by another company, usually referred to as the parent company or holding company. A subsidiary is a company that is partly or completely owned by another company that holds a controlling interest in the subsidiary company. If a parent company owns a foreign subsidiary, the company under which the subsidiary is incorporated must follow the laws of the country where the subsidiary operates, and the parent company still carries the foreign subsidiary's financials on its books (consolidated financial statements). For the purposes of liability, taxation and regulation, subsidiaries are distinct legal entities.

INVESTOPEDIA EXPLAINS 'Subsidiary'

The purchase of a controlling interest differs from a merger and the parent corporation can acquire the controlling interest with a smaller investment. Additionally, stockholder approval is not required in the formation of a subsidiary as it would be in the event of a merger. Famous investor Warren Buffett's Berkshire Hathaway, Inc. has a long and diverse list of subsidiaries, including Clayton Homes, the Pampered Chef, GEICO Auto Insurance and Helzberg Diamonds.

RELATED TERMS
  1. Spinoff

    The creation of an independent company through the sale or distribution ...
  2. Split-Off

    A means of reorganizing an existing corporate structure in which ...
  3. Captive Finance Company

    A subsidiary whose purpose is to provide financing to customers ...
  4. Consolidated Financial Statements

    The combined financial statements of a parent company and its ...
  5. Affiliate

    A type of inter-company relationship in which one of the companies ...
  6. Wholly Owned Subsidiary

    A company whose common stock is 100% owned by another company, ...
Related Articles
  1. The Importance Of Corporate Transparency
    Investing Basics

    The Importance Of Corporate Transparency

  2. Conglomerates: Cash Cows Or Corporate ...
    Investing Basics

    Conglomerates: Cash Cows Or Corporate ...

  3. Why Can't Economists Agree?
    Economics

    Why Can't Economists Agree?

  4. The Ins And Outs Of Corporate Eurobonds
    Forex Education

    The Ins And Outs Of Corporate Eurobonds

Hot Definitions
  1. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  2. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  3. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  4. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  5. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  6. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
Trading Center