Subsidary Company Definition

23 OCTOBER 2024
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Subsidary Company defintion as Listed with UK Companies House

A subsidiary company in the UK is a company that is controlled by a parent company. According to UK Companies House, a Subsidary Company is defined as a company in which another company (the parent) owns more than 50% of the shares or controls more than 50% of the voting rights. Alternatively, a company can also be classified as a subsidiary if the parent company has the authority to appoint or remove the majority of the board of directors.

This company type is important for businesses that operate under a corporate group structure, where the parent company exercises control over its subsidiaries. The subsidiary company definition is essential for understanding legal obligations, particularly regarding financial reporting and corporate governance.

Understanding the dynamics of a Subsidary Company is crucial for effective management and strategic planning within a corporate group.

Subsidiaries must adhere to specific reporting requirements under UK law, including preparing financial accounts. In some cases, subsidiaries may be eligible for company filing exemptions, especially if their financials are included in the parent company’s consolidated accounts.

Recent legislation, such as the Economic Crime (Transparency and Enforcement) Act 2022, has reinforced the importance of transparency in group structures, requiring subsidiary companies to disclose Persons of Significant Control (PSC) and adhere to other corporate governance regulations.

Frequently Asked Questions

What is a Subsidiary Company?

A subsidiary company is one that is controlled by another company, called a holding or parent company. Under the UK Companies Act 2006, control is established if the holding company either holds a majority of voting rights in the subsidiary, appoints or removes a majority of its directors, or controls a majority of voting rights (directly or via agreements with other members).

What does “wholly-owned subsidiary” mean?

A wholly-owned subsidiary is a subsidiary company where all the shares (membership) are held by the parent company itself (or by the parent’s wholly-owned subsidiaries or people acting on their behalf). In effect, no outside shareholders hold any part of the company.

Why is it important to understand what a Subsidiary Company is?

Knowing whether a company is a subsidiary has legal, financial and reporting implications. For example it determines how consolidated accounts are prepared (including subsidiaries in group accounts), what exemptions might apply for filing and auditing, and it affects obligations under corporate law in terms of control, liability, and transparency.

  1. Companies House – Persons of Significant Control (PSC) Learn how subsidiary companies must report Persons of Significant Control (PSC), ensuring transparency in corporate ownership.
  2. Economic Crime (Transparency and Enforcement) Act 2022 An important piece of legislation affecting UK companies, requiring subsidiaries to disclose ownership and control structures.
Get the data on Subisdary Companies and their structure

For more detailed insights into companies and their filings, explore our Business data product which provides extensive Company Data on all UK-registered companies.

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