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Holding Company (Parent Company) - Meaning, Examples, Rights & Responsibility - YouTube
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now today we have a topic that is
holding company or the parent company we
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usually have heard this terms like
parent company's subsidiary companies I
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mean what are the terms holding company
subsidiary companies we will try and get
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this in a very detailed format now as
you can see you know there's holding
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company is a company which majority
voting rights of the other companies
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that is subsidy they control it it's
management and their operations of the
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company so in this particular scenario
what is first I'll take what is the
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holding company see first see the parent
company or a holding company is a
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company with the majority of voting
rights of the other companies like that
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subsidiary is to control its management
and the operations of the company and a
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wholly owned subsidiary a wholly owned a
wholly owned subsidiary company you know
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to control its management and you know
would be the one we're in the parent
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company has 100% of the voting
rights so a partially owned subsidiary
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company will be where the parent company
has more than 50% has added over here
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greater than 50% of the voting rights
like if I talked about Walt Disney let
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me talk about Walt Disney Company okay
so they have more than 50 subsidiary
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right and there's a partial list of the
subsidiary company okay like ABC holding
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and cables and Disney Enterprise doesn't
have to see Disney online and so on and
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so far they are so what exactly here is
the relationship between the holding and
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the subsidiary companies discuss the see when the original company that is when
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are talking about when the holding
company if they wishes to expand its
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business the directors and the other
stakeholders they decide to open its
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next unit in order to further handle the
expanded business for its smooth
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functioning the next unit or the new
firm is called subsidiary okay so it is
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also known as your sister concern of the
original holding company it's known as
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sister concern so when a business is is
basically let's say it is in the
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expanded or the in the expansion stage
the subsidiary may care carry out our
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same lines of the business with the
expander expansion to some other
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locations possible may be or vary with
the original operations so that is also
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there with expansion being a new line of
business so what's the parent company
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and subsidiary is you know we can say
that they're independent of each other
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independent organizations however the
original company that is the holding
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company they hold the majority of the
shares any concern and the reason for it
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being called as the subsidiary or the
sister concern now we'll take an example
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here of Nike a parent company like Nike
start with an example here let's say
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Nike Inc has more than 100 subsidiary
companies the partial list of these
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subsidiary is like you know Nike just
saying for the tire for the for your
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knowledge purpose Nike Hongkong Nike
hungry okay
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then there's Nike India holding limited
so on and so forth Kenya Nike Japan like
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Israel so limited SNL LLC BV Inc so
that's how these subsidiaries names are
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being formed based on the countries in
which they they they they have been
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operated let's say Nike if Nikes operate
is getting operated in India then it
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goes with limited
it is getting operated in us then it
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goes with the ink or probably PLC
different name is given in UK so in that
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fashion different different names are
given where the operations are getting
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carried out now you will look at the
full list on the website see what are
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the rights of the holding company that I
ll surely make you do on the C or the
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rights of the holding company is that
you know if it holds let's say greater
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than 50% of the rights in the subsidiary
company controlling power over the
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subsidiary company there is a
controlling power over the subsidiary
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company and it maintains its voting
rights regarding its subsidiary company
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so what here are the responsibilities of
the parent company see it needs to report
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its financial by including those
subsidiary company as well and since it
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is holding 50% since it is holding 50%
or more of the rights in the subsidy
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company right and they are responsible
for the what we call as the tax
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obligations that is possible there if
they are having it responsible for the
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tax obligation of the subsidiary as well
they are liable for the sister concern
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or the sister operation business and the
management resource of its location
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sometimes they serve as the guarantor of
the subsidiary in their financial
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requirements now I'll make you learn the
next is the acquisition of the holding
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company now see the parent companies
formed not only by the expansion of the
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business and creation of the new subsidy
unit but also through the acquisition C
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upon acquiring majority of the ownership
of the particular company by another
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well established company so the rights
remember the rights are transfer to the
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acquiring company which makes it a
parent company right
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so with such an acquisition companies
gain what we call as synergies and/or
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the holding company gets extended
advantage from the subsidiary in its own
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line of business here on the other hand
if you see up for Microsoft they are
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requiring upon Microsoft acquiring the
LinkedIn on social networking site both
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Microsoft and LinkedIn you know on the
they were having are functional yet but
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benefit of each other
synergies they are sharing it now
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Microsoft can provide a platform to its
existing customers to enhance the
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employment strategies with the help of
the Linden Y Linden has a very good
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platform by Microsoft to provide its
services to all its customer and can
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even create new schemes for its
customers so in cases of the acquisition
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the shareholders or of the holding
company they are offered the shares of
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the subsidiary companies and at the same
time you know the voting rights of the
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shareholders for their parent company
gets extended by this subsidy too so
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another benefit that comes into picture
here is that when the assets if they are
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transferred between the two companies of
the holding company and subsidiary the
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tax effects on the capital gain for the
receiver company can be avoided and
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other tax benefits like you know rising
that is arising from dividend payouts of
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one company can be used by the other one
as well so over here what exactly the
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conclusion arrives let's draw down to
the conclusion part see there are
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acquired some benefits of the holding
company and subsidiary model a parent
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company invites a lot of opportunities
for the subsidiary company and its
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employees most of times it works towards
the benefiting both the companies and a
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lot of investment banks in in Luxembourg
countries had a sister concern in
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off-shore countries which contributes to
the middle office and the back
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operations of their holding company so
the parent company and subsidy in such
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cases hold the majority of the shares
of such subsidies and thereby being
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allowed for making major decisions plus
the sister concern is welcome to enjoy
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the common rights that goes through
between the companies and hence it
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brings out the best performance of the
companies now the acquisitions of the
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modules can be a good news to new
investors as well as you know the
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established firm because they may
acquire the rights in the companies of
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the smaller companies and thereby they
becoming its parent come in such case
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the operations of the smaller company
are enhanced and many fold giving a much
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better opportunity to the new investor
to invest in it and may offer a
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promising return to them so that's it
for this particular topic or shows if
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