Difference Between a Parent Company and a Subsidiary

Quick answer: Difference Between a Parent Company and a Subsidiary is a public legal-education guide. The correct legal step may depend on the facts, documents, location, timing, and current law, so readers should seek tailored legal advice before acting.

This article is provided for general legal education only and is not a substitute for advice on a specific matter.

DIFFERENCE BETWEEN A PARENT COMPANY AND A SUBSIDIARY

Parent companies own and control up to 51% of a company's stocks and this gives them major control over such a company. The ownership of these stocks gives it major control over its operations and they can decide the operations or activities of this company. They either do this directly or with the use of a "manager" who oversees that the instructions given are carried out.

Parent companies acquire these smaller companies, by buying enough stocks that can give majority rights to the company. Usually, to have enough control, they purchase up to half of the stocks in the company. This creates an avenue for less competition in that field of business and the promotion of smaller ideas.

A subsidiary company is owned either completely or partially by another company. This company may be referred to as a "parent company" or "holding company". The parent company owns up to 50% of stocks in the company before they can be called a "subsidiary". When the parent company owns 100% in stocks, the subsidiary is called a "wholly-owned subsidiary".

Subsidiaries are commonly seen in real estate businesses. In this instance, the main company divides each property as a subsidiary so that they can protect these properties from various liabilities that may arise. Ownership of a subsidiary company is usually spelt out legally in the registration of such a company.

However similar these companies may look, they have some major differences that may be considered below :

1. Parent companies can acquire up to 50% stocks in companies and such acquisition gives them major control in the activities of the company. A subsidiary company can be owned by these parent companies. Subsidiaries can be owned completely or partially.

2. Subsidiary companies may have their sub-companies as well, which would create different areas of ownership while Parent companies cannot be divided into another company but strictly as their owning subsidiaries.

3. A parent company can also be called a "holding company" while a subsidiary company can be a "subsidiary" or "wholly-owned subsidiary".

4. Parent companies can exercise total control or major control over Subsidiary companies based on the acquisition of stocks in the company. The minimum rate for major control in such companies is usually 50%.

5. Parent company is a single company that can acquire a controlling interest in other companies while A subsidiary can be multiple chains of companies/ businesses capable of being owned.

These are some of the differences between Parent companies and A Subsidiary. The ownership of a parent company over a subsidiary opens an avenue for various benefits like Fewer liabilities, Reduced competition, and Boosted financial activities, among others. Some examples of Parent companies in Nigeria are UAC, RT Briscoe, MRS Holding company, Genesis Deluxe Cinemas etc. Facebook is also a popular parent company with subsidiaries of WhatsApp and Instagram. Examples of Subsidiary companies are Google, Disney channel, Instagram, etc.

In conclusion, A Subsidiary company is wholly or partially owned by a parent or holding company.

NB: This article is not a legal advice, and under no circumstance should you take it as such. All information provided are for general purpose only. For information, please contact chamanlawfirm@gmail.com

WRITTEN BY CHAMAN LAW FIRM TEAM

EMAIL: chamanlawfirm@gmail.com

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