A holding, derived from holding company, is a financial company (parent company) that owns part or all of the capital of other legal entities (which may operate in different economic sectors or in different phases of the same production process), with the aim of managing and controlling the financial, industrial and commercial aspects. Control of a company can be obtained through the possession of a number of shares that guarantees the absolute or relative majority in ordinary meetings, but there can also be situations of indirect control, in which the shareholding structure takes on a branching configuration with the holding company at the top and, possibly, more ‘branches’ (representing the shareholdings) that connect the companies to each other.
Due to the possible formation of large oligopolistic concentrations through the multiplication of direct, indirect and cross-shareholdings, belonging to a single company, the phenomenon of holding companies is sometimes considered a threat to the principles of free competition and transparency in relations between companies. However, in modern economies, holding companies represent an effective tool for coordinating companies and rationalizing their activities in the industrial, commercial and financial sectors, replacing the phenomena of vertical and horizontal integration with the largest group of companies, characterized by the unity of the underlying economic interests.
Based on the activity carried out, a distinction is made between a pure holding company, with the sole function of managing control over the group’s companies, and a mixed holding company, which combines its own production or exchange activity with the prevalent financial activity. At an advanced stage of state intervention in the economy, public holding companies may also be formed. In Italy, in particular, the formation of a group of holding companies with public legal personality has given rise to the phenomenon of state shareholdings.
If the participation concerns a joint-stock company, we speak of shareholding, and we speak of command participation, control participation, majority participation (even if considerably lower than the absolute majority) when the possession of a significant share of the share capital is united in the hands of one or a few, total participation, equal to the entire share capital, and minority participation. There can also be credit participation, when the position taken towards the company is that of creditor and not shareholder, but in this case we also speak of interest.
Participations can be unilateral or reciprocal: in the second case, chains of companies are created and, if two companies mutually hold participations, it is defined as cross participation. Participations in joint stock companies are subject to specific regulations. Companies linked by controlling interests generally form a single economic group, group or holding company.
Controlled and associated companies
The following are considered controlled companies:
- companies in which another company holds the majority of votes exercisable in the ordinary meeting;
- companies in which another company holds votes sufficient to exercise dominant control in an ordinary meeting;
- companies that are under the dominant control of another company due to specific contractual ties with it.
Companies over which another company exercises significant influence are considered to be associated. Such influence is presumed when at least one fifth of the votes can be exercised in the ordinary meeting or one tenth in the case of companies with shares listed on regulated markets.
Financial holding company
The financial holding company (or “pure holding”) is a holding company that does not carry out production activities or the exchange of goods or services (such activities can be carried out by companies in which the financial holding company has a stake or which it owns). Its sole business purpose is to control the companies through the holding of their respective shares.
Operating holding company
The operating holding company (or “mixed holding company”) is a holding company that carries out production or exchange activities of goods or services. Therefore, the operating holding company is opposed to the financial holding company (a company cannot be both a financial holding company and an operating holding company at the same time).
Parent holding company
The parent holding company (or “parent company” or simply “parent company”) is a holding company that owns shares or quotas of other companies in such quantities as to exercise dominant control over their management. The parent holding company can be an operating holding company or a financial holding company, depending on whether or not it carries out production or exchange activities of goods or services.
Management holding company
The management holding company is a holding company that coordinates companies with strategic interdependencies between their businesses, always seeking synergies between them. The management holding company can be an operating holding company or a financial holding company, depending on whether or not it carries out production or exchange activities of goods or services.
Subholding
The subholding company is a holding company that is placed between a parent company (above) and operating companies (below) that operate in common sectors (business). Usually, it is a financial holding company. The term is sometimes used instead of holding company (or sector holding company).
Associated Companies
Companies with shares or ownership interests held by the same holding company are called “associated companies”. In particular, if the shareholding in the associated company is significant but not sufficient to exercise control over the management, the associated company is defined, more precisely, as “associated”. On the contrary, if the shareholding in the associated company allows control over the management, the associated company is defined, more specifically, as “controlled”.
