Holding company

The term holding is a short form for the holding company, holding organization or holding company. He does not describe a legal form, but an established practice in the form of organization hierarchically structured organization. The term will be both for the whole of the corporate hierarchy as well as for the peak organism alone application. The term of the holding company is not yet legally only sector-specific in the case of insurance holding companies (4 VAG in § 104 paragraph 2 sentence ) and the mixed financial holding defined ( in § 2 para 10 FKAG ) and is therefore not used consistently in the literature. This is, however, in 2013 [ deprecated] change in the course of implementation of the EU Directive 2011/61/EU on Alternative Investment Fund Managers in the form of the investment Code.

Holding structures provide many years a widespread form of organization both nationally and internationally active companies dar. Historically, it is the oldest form of business organization or formation of groups of companies.

Definition according KAGB -E ( Germany )

The term " holding company " shall be defined by law for the first time in the course of implementation of the EU Directive 2011/61/EU on Alternative Investment Fund Managers into German law. According to the previous (2012 ) bill a holding company is a company which

" To one or more other entity holds an equity interest, the commercial purpose of which is to follow through their [ ... ] investments a business strategy [ ... ] to promote their long- term value, and when it is a company that either First on their own account is active and whose shares are admitted to trading on a regulated market in the [ European] Union, or 2 the [ ... ] was not founded with the main purpose to provide its investors through the sale of its subsidiaries or affiliated companies a return on investment. "

The definition is intended primarily seek to clarify corporate hierarchies of private equity management companies ( " investment vehicles " ), are subject to certain legal regulations according to KAGB. Therefore, the emphasis is on the promotion of the "long -term value ," and the denial of profiting from simple acquisition and resale of subsidiaries. Furthermore, the KAGB defined for this design is not the whole hierarchy, but only in relative terms, each upper level as a holding company.

In contrast to related companies according to § 15 of the German Stock Corporation Act, the holding company requires, by definition, neither controlling interest, or economic dependence, nor any other explicit agreements between the companies. It allows these issues very well. The same applies to the definition of the concept of the group in accordance with § 18, which is a specific form of affiliated companies.

Features

The holding organization consists of at least two levels, a parent company, which is also referred to as a holding company, and several legally and organizationally independent subsidiaries in which the holding company holds an equity interest ( from the English to hold). If this is a majority-owned and / or is a domination and profit transfer agreement, then one speaks of a group.

The organizational form of the holding company is defined by the internal distribution of property rights, distribution of tasks, or decision-making and authority to issue the legal form boundaries.

The provision of services is carried out in the subsidiary, the basic units of the Group. Whether this vertical component stages operate in the same value chain, and thus there is a functional structure or whether they are active in a variety of value-added processes and, thus, a breakdown by object areas ( divisional organization ) is irrelevant. Many holding companies try to take advantage of synergies between the subsidiaries. From this intention arise central areas in the relevant functional arrangement authority over its subsidiaries, which are created by regional or product- oriented perspective.

Forms of Holding

We distinguish between different forms of holding organization, depending on which functions and decisions are perceived by the holding company headquarters:

Operational holding or parent company model

This is the traditional form of organization of large companies. The parent company in the traditional sense unfolds here essential necessary to the production process and activities themselves, that is, it is directly active in the market ( in the sense operationally, active trading '). The creation or acquisition of subsidiaries is used to supplement or support, such as foreign branches. The subsidiaries are therefore much smaller than the parent company generally and depend on this from strategic, structural and personnel. The corporate headquarters exerts very strong influence on the subsidiaries. The operative holding are found primarily in companies that have grown through vertical and horizontal diversification of a dominant business segment out.

Management holding company or a strategy holding

In contrast, the management holding company has no operative business. Unlike the financial holding company but it keeps not only the investments in the subsidiaries, but will do so. These management responsibilities typically include setting the strategic business, strategic management, the appointment of senior executives and controlling the flow of capital within the group. It is possible that the board members of the holding company and the management functions of the subsidiaries, for example, as chairman perceive. The biggest advantage of this holding is its flexibility, since each subsidiary develops strategies for its business. This holding company form combines the market proximity and flexibility of small and medium-sized enterprises (SMEs ) with the financial strength and market presence of large companies. Examples of Management Holdings can be found in automotive and electrical companies.

But part of the strategic Holdings counting and financial holdings that serve to represent the group of companies to the outside as a whole, such as in the sense of the brand: the conductive body of the group, the company is headquartered, then - hierarchically addition to the productive sectors - as a subsidiary under the settled umbrella brand, in which all common strategic concepts are summarized. This structure is used in all industries where a group wants to present itself as a company with broad expertise, such as in the construction sector as well as in retail groups.

Financial holding company or financial holding

The financial holding company is the counterpart of the operational holding. It manages primarily the assets of the Group as a whole and does not result in operational or strategic direction of their subsidiaries. By occupying top management positions, the setting of financial targets and the allocation of financial resources is only indirectly influence. In the foreground the income and value optimization of the Group is as a whole, or only individual (minority) shareholdings.

The financial holding company may be as far taken back in their entrepreneurial influence that she is still only asset management company with no corporate property. Then one speaks of an investment company, such companies often constructs reduce to a registered name and no staff. Such holding companies are used on the one hand in company groups more or less independent companies to comply with the increasingly stringent consolidated financial obligation, ie the consolidation of only internal business flows or even to monetarily as well as operationally independent and elastic structure the entire group in both acting to be able to ( deconsolidation, Entherrschungsverträge ). In addition, we used financial holding companies on the organizational arrangement of company acquisitions, or strategic reasons, such a renowned company names, maintain or juxtapose several established names after mergers, without having to RENAME the part of firms themselves firmenbücherlich, or to establish a new common name. Another sector are located in the pure financial holding companies, are about groups of companies in private ownership, where the holding company ownership by private individuals or private foundations - representing, as well as international corporations, in which the national holding all of the parts of the group - often without any economic competence reflected in one state. The latter forms are reduced to a mere representation of a legal entity.

Organisational or structural Holding

Increasingly - now used holding companies and the internal organization - on acquisitions and start-ups also. Then we also speak of Organizational Holding: for instance, could one railway company to summarize his entire passenger and freight transport agenda ( divisionäre outline ) in two holding companies to maintain an overview of the class (business area consolidation ), or a telecommunications provider data line operation and service ( functional organization ) to occur under different names. This group structure is independent of whether the divisionäre or functional roof holding operations of its own in the sense of a department head, if she only works strategically in terms of a supervision department, or whether it represents a pure holding company, the parent company. About this shape, even complex company structures organize, or multiple nest together: Holding companies are just more subsidiaries within the group.

Benefits

The holding organization is an instrument for procuring tax benefits, to circumvent capital contribution limits and to the achievement of scale and specialization benefits as part of the investment. Furthermore, this form of organization allows the easy integration of acquired companies.

Tax benefits can be utilized by the holding company relocates its headquarters in a country are given in the attractive tax environment. The discharged from the subsidiaries to the holding company profits are then may a more favorable tax laws.

For antitrust reasons, it is companies often forbidden to hold larger equity stakes in other companies. In many cases, the exceeding of a minimum participation beyond is associated with legal obligations. To get around this, holding companies are established in many cases.

Holding companies allow those entities to transform direct into indirect shareholdings. For legislators and regulators, it is difficult by the interposition of intermediate holding companies may uncover indirect equity investments and prohibited. Investments must be disclosed in many states, however, today. The notification requirements also apply to foreign companies unless they are involved in German companies.

Disadvantages

The disadvantages of a holding company are the general dependence, anonymization, and the similarity, as in the business area organization. By structuring in subsidiaries blindness to the objectives of the group as a whole can arise in these. Through their legal independence, a significantly higher administrative cost arises beyond.