Plain language law

New Zealand law explained for everyone

Companies Act 1993

Preliminary

5: Meaning of holding company and subsidiary

You could also call this:

“What it means for companies to own or control other companies”

This law explains what it means for one company to be a ‘subsidiary’ of another company, and what a ‘holding company’ is. These are important terms in the Companies Act 1993.

A company is a subsidiary of another company if any of these things are true:

The other company controls who is on the board of the subsidiary company. This means they can decide who makes important decisions for the subsidiary.

The other company can control more than half of the votes at the subsidiary’s meetings. This gives them a lot of power over decisions.

The other company owns more than half of the subsidiary’s shares. Shares are like pieces of ownership in a company.

The other company gets more than half of the money the subsidiary gives to its shareholders.

A company can also be a subsidiary if it’s owned by another company that is already a subsidiary of the main company. It’s like a chain of ownership.

A holding company is simply a company that has a subsidiary. If company A is a subsidiary of company B, then company B is the holding company of company A.

When this law talks about companies, it also includes other types of businesses that are set up in a similar way to companies.

You can find more information about this in section 7 and section 8 of the Companies Act 1993.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM319999.

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Part 1 Preliminary

5Meaning of holding company and subsidiary

  1. For the purposes of this Act, a company is a subsidiary of another company if, but only if,—

  2. that other company—
    1. controls the composition of the board of the company; or
      1. is in a position to exercise, or control the exercise of, more than one-half the maximum number of votes that can be exercised at a meeting of the company; or
        1. holds more than one-half of the issued shares of the company, other than shares that carry no right to participate beyond a specified amount in a distribution of either profits or capital; or
          1. is entitled to receive more than one-half of every dividend paid on shares issued by the company, other than shares that carry no right to participate beyond a specified amount in a distribution of either profits or capital; or
          2. the company is a subsidiary of a company that is that other company's subsidiary.

            1. For the purposes of this Act, a company is another company's holding company, if, but only if, that other company is its subsidiary.

            2. In this section and sections 7 and 8, the expression company includes a body corporate.

            Compare
            • Corporations Act 1989 s 46 (Aust)