Subsidiary

Subsidiary (Subsidiary Company, Daughter Company) is a company controlled and owned or partially owned by another company which is called as a holding company.

Subsidiary in practice: A subsidiary is a separate legal entity, usually some type (a company, i.e. joint stock company, corporation or some type of limited liability company. The reasons of origins of the subsidiaries are generally tax, legal and financial (fiscal consolidation, sharing of operating losses, the distribution of costs of research and development, tax optimization), investment protection, legal liability or intellectual property.

Subsidiary companies usually have their own management structure. Their management and control is through the influence of the ownership of the parent company (see corporate governance), which appoints the members of the statutory bodies, the Board of Directors, and often the highest level managers (the so-called C-level). The subsidiary may also be controlled by common rules and regulations of functioning.

Terms of establishment of subsidiaries vary in different countries and their legal systems.