Parent company
Parent company is a company that controls another company, called a subsidiary. Control usually means it can decide who runs the board or how key votes go, whether directly or through other companies it owns. Together, the parent and its subsidiaries form a “group”. In the UK, the term is often used alongside “holding company”.
Simple example
If Company A owns most of the voting shares in Company B, Company A is the parent and B is the subsidiary. If A owns all the shares, B is a wholly owned subsidiary.
A parent may need to prepare group (consolidated) accounts that show the group as one economic unit, even though each company stays a separate legal entity with its own obligations. Control can be direct or indirect, and it can exist even without full ownership if the parent can still direct key decisions.
Main ways a parent can have control:
- Owning a majority of voting rights in the subsidiary.
- Having the right to appoint or remove a majority of the directors.
- Control through agreements or other rights that direct key policies.
- Indirect control via another subsidiary that holds the influence.
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