What is a Holding Company?
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- Categories: All Blog Posts, Company Setup, Holding Company, Mainland
A holding company is a type of business entity that is usually a corporation or a limited-liability corporation (LLC). A holding corporation, in most cases, does not manufacture, sell, or engage in any other type of business activity. Holding companies, on the other hand, own most of a company’s equity.
An “umbrella” or parent company is another term for a holding corporation.
If a holding company is set up appropriately, one subsidiary’s debt liability will have no bearing on the others; if one subsidiary declares bankruptcy, it will have no bearing on the others.
Individuals’ personal assets might also be safeguarded through holding companies. With a holding company, those assets are formally held by the corporation rather than the individual, who is so protected from financial obligations, lawsuits, and other concerns.
Holding firms help their subsidiaries by lowering the cost of much-needed operational capital with their resources. The parent firm can use a downstream guarantee to make a loan commitment on behalf of the subsidiary.
Holding firms have the advantage of being protected against losses. If a subsidiary company fails, the owning company may suffer a capital loss and a drop in net worth. The creditors of the bankrupt corporation, on the other hand, have no legal recourse against the holding company.
As a result, a parent organization might establish itself as a holding company and create subsidiaries for each of its business lines as an asset protection strategy. One subsidiary might own the parent corporation’s brand name and trademarks, while another might hold the parent corporation’s real estate.
This strategy serves to restrict the holding company’s (and its subsidiaries’) financial and legal liabilities risk.
Holding companies come in a variety of shapes and sizes.
If a holding company is founded solely for the purpose of owning stock in other companies, it will be called as pure. In essence, the organization does not engage in any other businesses apart from owning or controlling a company or a group of companies
A mixed holding company is one that not only owns another company but also runs its own operations. A holding-operating corporation is another name for it.
Conglomerates are holding firms that engage in completely distinct fields of business from their subsidiaries.
An instant holding company is one that holds voting shares or control of another firm notwithstanding the fact that the latter is already under the control of another organization. Simply put, it’s a form of holding corporation that already has a subsidiary.
A company that is both a holding company for another company and a subsidiary of a larger corporation is known as an intermediate holding. As a holding company of a smaller group, an intermediate holding firm may be excused from releasing financial records.
Holding Company’s objective is to be a substitute of offshore / IBC companies.
A holding company exists for the sole purpose of
- controlling other companies, whether they be other corporations, limited partnerships or limited liability companies.
- may also own property, such as real estate (internationally),
- other assets.
Cost of Holding Company Formation in UAE
With FZ Business Consultancy, you can set up a Holding company starting at AED 999.
Individuals and companies who intend to use this firm worldwide for agreements and asset holding may benefit from forming a holding company. As stated on the company license, these entities do not require a bank account; nonetheless, they can set one up.
For Europeans and others, a holding company can be beneficial.
Clients will receive the following documents after the company is formed.
- Certificate of Incorporation
- Memorandum of Association
- Share Certificate
- Lease Agreement
- Certificate of Incumbency
- Certificate of good standing*
- First board resolution*
- Bank Account Introduction Letter*