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The most common way that control of a subsidiary is achieved is through the ownership of owned, it is called a branch. A subsidiary is different from a branch in that the former is jointly owned by the parent company and others while the latter is completely owned by the parent company. Subsidiaries are separate, distinct Legal entities for the purposes of Tax ation and Regulation . For this reason, they differ from Divisions , which are businesses fully integrated within the main company, and not legally or otherwise distinct from it. Subsidiaries are a common feature of business life and few if any major businesses do not organise their operations in this way. Examples include , or Citigroup as well as more focused companies such as IBM , or Xerox Corporation . These, and others, organize their businesses into national or functional subsidiaries, sometimes with multiple levels of subsidiaries. An operating subsidiary is a business term frequently used within the United States Railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity, locomotives and Rolling Stock . In contrast, a non-operating subsidiary would exist on paper only (i.e. stocks, bonds, articles of incorporation) and would use the identity and rolling stock of the Parent Company . __NOTOC__ REASONS WHY A COMPANY MAY HAVE SUBSIDIARIES The following are common reasons why companies have subsidiaries, but no list can ever be exhaustive.
CONTROL The word "control" used in the definition of "subsidiary" is generally taken to include both practical and theoretical control. Thus, reference to a body which "controls the composition" of another body's board is a reference to control in principle, while reference to being are able to cast more than half of the votes at a general meeting, whether legally enforceable or not, refers to theoretical power. The fact that a company has a holding of less than 51% which, because the holdings of others are widely dispersed, gives effective control is not enough to give that company 'control' for the purpose of determining whether it is a subsidiary. In Australia , for instance, the Accounting standards defined the circumstances in which one entity controls another. In doing so, they largely abandoned the legal control concepts in favour of a definition that provides that 'control' is "the capacity of an entity to dominate decision-making, directly or indirectly, in relation to the financial and operating policies of another entity so as to enable that other entity to operate with it in pursuing the objectives of the controlling entity." This definition was adapted in the Australian Corporations Act 2001 : s 50AA. Corporations Act 2001 - Sect 50AA from Australasian Legal Information Institute. Retrieved 9 September 2006. The subsidiary can also be made with the intent to defraud the investor, and therefore a court should keep in mind as to for what reasons the subsidary has been made. SEE ALSO BUSINESS MODELS WHICH FEATURE ELEMENTS SIMILAR TO SUBSIDIARIES FOOTNOTES }}} |
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