Subsidiary
Subsidiary is a company that is controlled by another company (the parent). Control means the parent can direct key decisions, usually through voting rights or the power to appoint and remove directors. The subsidiary is a separate legal entity, but it forms part of the parent’s group.
In accounts, the parent normally includes a subsidiary in group (consolidated) financial statements. A subsidiary can be in the same country or abroad. Ownership can be full or shared with other investors.
Simple example
Company P owns 70% of Company S, so S is a subsidiary. If P owns 40% but has the contractual right to direct key decisions, S can still be treated as a subsidiary.
How to tell a subsidiary from similar relationships:
- Wholly owned: the parent owns all shares. Partly owned: other investors hold a stake, creating a non‑controlling interest.
- Subsidiary vs associate: an associate is influenced but not controlled; the investor cannot set key policies on its own.
- Subsidiary vs branch: a branch is not a separate company; a subsidiary is a separate legal entity with its own obligations.
- Direct vs indirect: the parent may control a company through another subsidiary.
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