Wholly Owned Subsidiary

AAA

DEFINITION of 'Wholly Owned Subsidiary'

A company whose common stock is 100% owned by another company, called the parent company. A company can become a wholly owned subsidiary through acquisition by the parent company or spin off from the parent company. In contrast, a regular subsidiary is 51 to 99% owned by the parent company. One situation in which a parent company might find it helpful to establish a subsidiary company is if it wants to operate in a foreign market. This arrangement is common among high-tech companies who want to retain complete control and ownership of their technology.

INVESTOPEDIA EXPLAINS 'Wholly Owned Subsidiary'

Wholly owned subsidiaries allow the parent company to retain the greatest amount of control, but also leave the parent with all the costs and risks of full ownership. When a lesser number of costs and risks are desirable, or when it is not possible to obtain complete or majority control, the parent company might introduce an affiliate, associate or associate company in which it would own a minority stake.

RELATED TERMS
  1. Acquisition

    A corporate action in which a company buys most, if not all, ...
  2. Takeover

    A corporate action where an acquiring company makes a bid for ...
  3. Loss Disallowance Rule - LDR

    An Internal Revenue Service rule implemented in 1991 to prevent ...
  4. Split-Off

    A means of reorganizing an existing corporate structure in which ...
  5. Downstream Guarantee

    A guarantee placed on a loan on behalf of the borrowing party ...
  6. Closely Held Stock

    A company whose common shares are owned by one individual owner ...
Related Articles
  1. Mergers And Acquisitions: Understanding ...
    Fundamental Analysis

    Mergers And Acquisitions: Understanding ...

  2. What are the differences between affiliate, ...
    Investing

    What are the differences between affiliate, ...

  3. The Basics Of Mergers And Acquisitions
    Options & Futures

    The Basics Of Mergers And Acquisitions

  4. How Warren Buffett made Berkshire Hathaway ...
    Stock Analysis

    How Warren Buffett made Berkshire Hathaway ...

comments powered by Disqus
Hot Definitions
  1. Halloween Massacre

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

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

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

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

    A form of short-term borrowing for dealers in government securities.
  6. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
Trading Center