Financial Accounting

Meaning of subsidiary company

Subsidiary company

Last time we have discussed the meaning and types of holding company. Today we will discuss another type pf company that is subsidiary company. The company whose shares have been acquired is subsidiary company. A company can be subsidiary of another company if following conditions fulfilled.

1)      A company can be subsidiary of another company if other company controls the composition of the board of directors.

2)      If a company acquires more than the 50% equity shares of any other company.

3)      Also there is the case when it becomes the subsidiary of another company which itself is a subsidiary of a third company. For example: if R is the subsidiary of Y and Y is subsidiary of X than R would subsidiary of both Y and X.

There is a wholly owned subsidiary company which means when a holding company acquires 100% shares of subsidiary company.

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