Why Incorporate Company as a Holding Business?

A register holding company is fundamentally a parent corporation which owns a controlling interest in a supplementary company (or multiple subsidiary companies). According to section 1159 (1) of the Companies Act 2006 entitled Meaning of subsidiary etc:

• holds a mainstream of the voting rights in it, or
• is a member of it as well as has the right to appoint or eliminate a widely held of its board of directors, or
• is a associate of it and controls alone, pursuant to an conventionality with other members, a majority of the voting rights in it

 Incorporate Company

Holding Incorporate Company is often inactive in terms of trading, but sometimes they will deal themselves. Although the terms holding company as well as parent company are often used interchangeably, the latter normally implies a more vigorous trading role than the former.

What are the advantages of a holding company?

Holding companies are usually used to ‘hold’ any significant assets owned by the general group of companies, such as academic property, real estate as well as shares in the subsidiaries. This can decrease the risk of losing key assets if one of the supplementary companies falls into financial complexity, by ring-fencing them. Other advantages include:

Organisational structure – a holding company can bring together dissimilar companies, which can be helpful when acquiring other companies or else creating several business ventures, e.g. Google created a holding company known as Alphabet Inc. in 2015. In this situation, a holding company can make the general business structure clearer, which may facilitate with investment.

Tax – dividends are usually not taxed on ‘small companies’ if they pass between the supplementary companies as well as the holding company (known as the dividend exemption). 

Business sale – some companies may want to put up for sale a certain part of their business, in which case it is probable to create several subsidiaries along with a holding company, as well as to sell one of the subsidiaries.