What is a holding? Definition of the concept and its structure

What is a holding?

Holding is the main company that owns controlling stakes in all subsidiaries, united in a single structure. The main company controls the activities of all organizations included in its composition. Very often, such enterprises are independent of each other and have different fields of activity. For more than half a century, such forms of holdings as circular and cross have developed strongly.

what is holding

A circular holding is such a system when a subordinate company can simultaneously become a co-owner of the capital of the main company if it acquires the shares of a higher founder. As a result, a subsidiary may, to some extent, control the activities of the parent company.

What is a cross holding? This is a form of capital participation when a parent company of one structure can become an owner-partner of blocks of shares in subsidiaries that are part of holding structures of other parent companies.

These two types of holdings are more suitable for such commercial structures, which are included in the category of hard to regulate by government bodies.
The founders of the holding can be both individuals and legal entities.

holding definition

Organization Properties

To better understand what a holding is, consider its distinguishing features. These include the aggregate shares of firms in various industries and sectors of the economy, which are dispersed across many regions. If you draw a pyramid, you can imagine that at the top there is one or two companies, from which subsidiaries, grandchildren and other related companies go down. This is the stepping stone of such an organization as a holding. The definition of a holding indicates that its management is usually centralized. It is almost always in the hands of the parent company.

The holding structure is an association of companies owned by the parent company. What is a holding in the context of relations between subsidiaries and the parent company? Subsidiaries are legal entities and are completely independent, while the parent company receives profit from contributions to their capital, and is not responsible for their obligations.

holding structure

Unification paths

Enterprises can be combined into holdings in six ways:

The first method is called horizontal integration - joining enterprises that are united by a common activity. This is done to conquer new market segments, to strengthen the power of one company with the strengths of another.

The second way is vertical integration - organizations are combined into one technological cycle, mainly to reduce the overall cost of production.

The third way is the creation of new companies and their subsequent accession to the holding being created.

The fourth way is the creation of a new management company on the shares of two different organizations and its subsequent development, already without these organizations.

The fifth option is essentially the same as the previous one, only national and transnational corporations are united.

And the last, but no less popular and popular way, is the division of large companies after their restructuring.

Source: https://habr.com/ru/post/A13553/

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