A holding company is a company or firm that owns other companies' outstanding stock. The
term usually refers to a company that does not produce goods or services itself; rather,
its purpose is to own shares of other companies to form a corporate group. Holding companies
allow the reduction of risk for the owners and can allow the ownership and control of
a number of different companies. In the United States, 80% or more of stock,
in voting and value, must be owned before tax consolidation benefits such as tax-free
dividends can be claimed. That is, if Company A owns 80% or more of the stock of Company
B, Company A will not pay taxes on dividends paid by Company B to its stockholders, as
the payment of dividends from B to A is essentially Company A switching cash from one of its pockets
to another. Any other shareholders of Company B will pay the usual taxes on dividends, as
they are legitimate and ordinary dividends to these stockholders.
Sometimes a company intended to be a pure holding company identifies itself as such
by adding "Holdings" or "(Holdings)" to its name.
United States Banking
After the global financial crisis of 2008, many traditional U.S. investment banks converted
to holding companies. According to the Federal Financial Institutions Examination Council's
website, JPMorgan Chase & Co.., Bank of America Corp., Citigroup Inc., Wells Fargo & Co.,
and Goldman Sachs Groups, Inc. were the five largest bank holdings companies in the finance
sector, as of 31 December 2013, based on total assets.
Utilities The Public Utility Holding Company Act of
1935 caused many energy companies to divest their subsidiary businesses. Between 1938
and 1958 the number of holding companies declined from 216 to 18. An energy law passed in 2005
removed the 1935 requirements, and has led to mergers and holding company formation among
power marketing and power brokering companies. Broadcasting
In US broadcasting, many major media conglomerates have purchased smaller broadcasters outright,
but have not changed the broadcast licenses to reflect this, resulting in stations that
are still licensed to Jacor and Citicasters, effectively making them such as subsidiary
companies of their owner Clear Channel Communications. This is sometimes done on a per-market basis.
For example in Atlanta both WNNX and later WWWQ are licensed to "WNNX LiCo, Inc.", both
owned by Susquehanna Radio. In determining caps to prevent excessive concentration of
media ownership, all of these are attributed to the parent company, as are leased stations,
as a matter of broadcast regulation. Personal holding company
In the United States, a personal holding company is defined in section 542 of the Internal
Revenue Code. A corporation is a personal holding company if both of the following requirements
are met: Gross income test: At least 60% of the corporation's
adjusted ordinary gross income is from dividends, interest, rent, and royalties.
Stock ownership test: More than 50% in value of the corporation's outstanding stock is
owned by five or fewer individuals. Parent company
A parent company is a company that owns enough voting stock in another firm to control management
and operations by influencing or electing its board of directors. A parent company could
simply be a company that wholly owns another company. This would be known as a "wholly
owned subsidiary". See also
Bank holding company Conglomerate
Dubai World Investment company
Airline holding companies List of holding companies
Patent holding company Public Utility Holding Company Act of 1935
Samuel Insull Shell corporation
Social Holding Company External links
Emergence of Electrical Utilities in America, Smithsonian Institute, National Museum of
American History UK Holding Companies
KPMG article – Hong Kong as a Holding Company location
Incorporate a holding company in Hong Kong Notes