What Is a Holding Company?

A holding company is a type of organization that is generally a corporation or a limited liability company (LLC). A holding corporation, in most cases, does not manufacture anything, sell any products or services, or engage in any other commercial activities. Holding firms, on the other hand, own the majority of the shares in other corporations.
Despite the fact that a holding company controls the assets of other firms, it usually just has supervisory responsibilities. As a result, while it may monitor the company’s management choices, it is not involved in the day-to-day operations of these subsidiaries.
A holding company is sometimes known as a “umbrella” or “parent” corporation.

A holding company is a kind of business, which deals particularly with assets, investments and management, rather than just goods and services with a view of earning profit from the product sales. It will be limited by shares and the main activities of a holding company are owning assets in other companies. Assets can be in the form of intellectual property, real property, and shares.

As per Section 2(87) “subsidiary company” or “subsidiary”, in relation to any other company (that is to say the holding company), means a company in which the holding company—

  • Controls the composition of the Board of Directors; or

  • Exercises or controls more than one-half of the total share capital either at its own or together with one or more of its subsidiary companies.