Subsidiary

A subsidiary (also: subsidiary ) is a legally independent but economically unselbstständiges entity controlled by the parent company (in short: mother, also: parent company ) is controlled. The relationship with the mother is often regulated by means of so-called domination and profit transfer agreements.

Definition

The term is defined 90/435/EEC ( parent-subsidiary directive) in the Directive. In Germany, only corporations, companies can within the meaning of Be directive. Since 1 January 2009 there is a subsidiary once held by a parent company 10 % of its shares.

The capital of the subsidiary is usually majority owned by the parent company. If it is at the subsidiary to a corporation, the mother holds the majority of shares in the rule. In a subsidiary GmbH the parent company holds according to a rule, the majority of the share capital.

Unlike a joint venture subsidiary is controlled by the parent company. Are 100 % of the capital owned by the parent company, one speaks of a wholly owned subsidiary.

Sister companies are subsidiaries in which mostly the same companies or associates are significantly involved.

Foundation

Usually, a company established when a division (no longer) part of the actual core business of a company. Due to the spin-off of the parent company retains control, but economic problems of the subsidiary do not hit back at the mother. Also, transactions between the subsidiary and the parent be clearly identified. Often the parent company reserves, the majority of the subsidiary to sell, for example, in order to spread risks.

When buying a subsidiary one speaks of affiliation.

Examples

Some years ago, for example, many large companies in Germany have outsourced their IT departments into independent subsidiaries. Another prominent example is the creation of Infineon by Siemens. Here, the strongly fluctuating revenues and profits should be decoupled in the semiconductor market from individual earnings of the parent Siemens.

If the majority owner of a company itself, no society, no one speaks of a subsidiary. Thus, the German Bahn AG is not a subsidiary of the Federal Republic of Germany.

Box Company

Is a corporation of another corporation owns at least 25%, it keeps a box of participation. The unit value of a box company is subject to the parent company under certain conditions, not again the corporate income tax and trade tax ( participation exemption ). This avoids that capital and income of the subsidiary is taxed twice.