the holding

A holding company is a company or firm that owns other companies' outstanding stock. 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. Sometimes a company intended to be a pure holding company identifies itself as such by adding "Holdings" or "(Holdings)" to its name.

Due to a good location’s implementation, the holding company can benefit from an attractive tax regime. Some countries offer greater benefits in terms of tax efficiency for holding companies and entering into the conventions of avoiding double taxation, which allows to re-structure a group in a country with tax advantages.

The holding is easy to organize as no legal formalities are required for its formation. A company is just to hold the majority of the shares of other companies from the market. It does not need consent of the shareholders of the subsidiary companies.

The holding company can collect large amount of capital to be used for expansion and modernization of the business. The subsidiary companies retain their entity. They have the additional advantage that their management is centralized which reduces the expenses of management. The holding company is in the better position to restrict production according to the market demand. It does not face problems of over production and undercutting of prices by the competing firms.

The holding company realizes all the advantage inherent in the vertical combination. The holding company eliminates the competition by earmarking of market for the sale of product by each subsidiary company. A holding company is a very stable form of business combination. It does not dissolve with the whims of any subsidiary company.

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