What is a subsidiary company?

What is a subsidiary company? It’s actually one of those words that’s quite hard to say, isn’t it? Subsidiary? Subsidiary? Anyway, what is one? Well, stick around and we’ll work it out together.

Hi everyone, Simon here from The Contract Company. Contracts, it’s what we do, all day, every day, and sometimes overnight.

So, sometimes when we’re entering into contracts, you’re entering into a contract with a subsidiary, and you want to actually know what that means, because you want to understand who you’re dealing with.

What is a Subsidiary Company?

Right-o. Well, a subsidiary company is one that is owned by a parent company. So, I’ll use a little diagram for you.

You have a parent company, any company that sits under it, where this company owns the shares in this one, which means this one is a subsidiary of that one.

That’s the parent, that’s the child. That’s the easiest way to think about it, so. The parent company owns a child company, the child company is called a subsidiary.

Now, there are two types of subsidiaries. There’s a wholly-owned subsidiary, so the parent company owns 100%, or all the shares, in this company. Then this one’s called a wholly-owned subsidiary.

Or, it could just be a standard subsidiary company, and that means that this company, the parent company, owns the majority.  So 50.1% of the shares or more of the subsidiary, and then it’s called a subsidiary.

Now, if they didn’t own 50%, then they’re not considered a subsidiary, because more than half of the subsidiary’s shareholding would not be owned by that company.

So I hope that makes sense. So, to be a subsidiary, I need to sit under a parent, so for a child to have a parent, then the child needs to be at least 50% owned by the parent.  Otherwise, it’s not a subsidiary.

The 2 Types of Subsidiary Companies

To all you children and parents out there, I hope that wasn’t offensive, anyway. So that is what a subsidiary is, and there are two types: wholly-owned, and just a normal subsidiary.

Read how it is different from franchising.

If you have any questions about that, or in general, feel free to get in touch with us, simon@contractcompany.com.au, 1-800-355-455, and to all those people listening to this on a podcast, I’m sorry. You didn’t see the hand signals, so you probably can’t work any of that out. Anyway. Bad luck.

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