Talk:holding company

RFV

See Wiktionary:Requests for verification archive/2012‎#holding company. - -sche (discuss) 20:20, 23 March 2012 (UTC)

RFV discussion: February–March 2012

The following discussion has been moved from Wiktionary:Requests for verification (permalink).

This discussion is no longer live and is left here as an archive. Please do not modify this conversation, but feel free to discuss its conclusions.

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holding company

Sense: "(business) A company without significant operations that only holds ownership interests in other companies." Really? ---> Tooironic 13:44, 7 February 2012 (UTC)

Yes, really. It's the first sense which is wrong. The definition is that of a parent company. --Hekaheka 17:21, 7 February 2012 (UTC)

The new definition would include any investment company, such as a venture capital firm or a mutual fund. I think that, in practice, holding company is not used for such entities. In the US, in particular, the application of the term is influenced by w:Public Utility Holding Company Act of 1935 and w:Personal holding company. I think that, in practice, holding companies usually have a controlling interest in one or more of the companies whose shares they own. In any event, the term is not applied to companies better characterized in some other way except with the SoP meaning of "a company that principally holds securities". DCDuring TALK 19:13, 7 February 2012 (UTC)

Let's see how others have defined a holding company:

1. businessdictionary.com[1]: Type of business organization that allows a firm (called parent) and its directors to control or influence other firms (called subsidiaries). This arrangement makes venturing outside one's core industry possible and, under certain conditions, to benefit from tax consolidation, sharing of operating losses, and ease of divestiture. The legal definition of a holding company varies with the legal system. Some require holding of a majority (80 percent) or the entire (100 percent) voting shares of the subsidiary whereas other require as little as five percent.
2. Freedictionary[2]: a company, usually a corporation, which is created to own the stock of other corporations, thereby often controlling the management and policies of all of them.
3. Investopedia[3]: A parent corporation that owns enough voting stock in another corporation to control its board of directors (and, therefore, controls its policies and management).
4. About.com[4]: A holding company is a company which owns controlling shares in another company or companies (assuming all of these companies are corporations), or a corporation organized to own and control other corporations. This control usually comes through owning a controlling interest (more than 50 percent) of the stock of the other companies, which are considered subsidiary companies.
5. An adviser in UK investment[5]: A holding company provides a means of concentrating control of several companies with a minimum of investment; other means of gaining control, such as mergers or consolidations, are more complicated legally and more expensive. A holding company can reap the benefits of a subsidiary's goodwill and reputation while limiting its liability to the proportion of the subsidiary's stock that it owns. The parent company in a conglomerate corporation is usually a holding company. Strictly speaking, the term "holding company" might be used to describe any company that owns a majority of shares in another company however this may only apply if that corporation's only reason for existence is to hold stock in other companies. Usually, though, the term signifies a company which does not produce goods or services itself, but, rather, whose only purpose is owning shares of other companies (or owning other companies outright). Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies. The owned companies may be: subsidiary companies - the holding company owns more than 50% thus giving control. Associated companies - the parent company owns 20-50%. This is a large shareholding should provide considerable influence (but not control) over the associated company. How much influence will depend on ownership of the other shares? Owning 49% and wanting control when a rival company has a 51% stake may be a less than appropriate strategy. Related companies as similar to associated companies. They typically own fewer than 20% of shares in another company. This holding may be held because good dividends may be expected or the two companies are co-operating with each other in some area of business. Small shareholdings may be held by banks or Unit or Investment Trust companies as ingredients in their portfolio of ownership.
6. Another source[6] (calling itself "Global Database"): Holding companies are conglomerates that own other firms. A company that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors. Also called parent company. It usually refers to a company which does not produce goods or services itself, rather its only purpose is owning shares of other companies. Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies. The use of a holding company is legally simpler and less expensive than other means of gaining control of another company, such as merger or consolidation. A holding company is able to reap the benefits of a subsidiary’s goodwill and reputation, yet its liability is limited to the proportion of the subsidiary’s stock that it owns. These and other factors make holding companies an effective form of organization on both national and international levels. The parent company in a conglomerate corporation is usually a holding company.

--Hekaheka 22:44, 8 February 2012 (UTC)

I like the economy of the Free Dictionary definition. I think they have captured the essence of the matter and have not attempted to address the variable relationship the term may have to "parent" and "conglomerate". There is the possibility that the holding company is not actually created for the purpose, but rather merely used for the purpose, as, for example, a "clean public shell (corporation)". The longer the definition, the more likely it is to not cover a significant share of the usage instances. I would not want to have to produce citations to show all attributes mentioned in the longer definitions. We could see whether the term "parent" is inherent. I think "parent" is an attribute of an entity that arises to distinguish it from other entities in the family. A "conglomerate" could itself be an operating company and own no shares in other companies. DCDuring TALK 04:04, 9 February 2012 (UTC)

I'm in the belief that "parent company" is any company that owns the majority of stock in another company. It may or may not have also other business. If owning stock is its sole business, it may also be called "holding company". A holding company may be parent company to some or all of its holdings. It may be a minority holder in every one of its holdings, in which case it cannot be called a parent. To sum up, "parent" refers to the kind of relationship of one company to another and "holding" refers to the kind of business that some companies do. --Hekaheka 14:53, 9 February 2012 (UTC)

I don't think "parent" is a word that needs to be in this definition. It could be a "see also" term. DCDuring TALK 16:19, 9 February 2012 (UTC)

Seems that everyone is more or less happy with what we have accomplished on this one -> striking. --Hekaheka (talk) 19:12, 19 March 2012 (UTC)