Subsidiary
A subsidiary, subsidiary company or daughter company[1][2][3] is a company owned or controlled by another company, which is called the parent company or holding company.[4][5] Two or more subsidiaries that either belong to the same parent company or having a same management being substantially controlled by same entity/group are called sister companies. The subsidiary will be required to follow the laws where it is headquartered and incorporated. It will also maintain its own executive leadership.
Not to be confused with Subsidiarity or Subsidy.The subsidiary can be a company (usually with limited liability) and may be a government-owned or state-owned enterprise. They are a common feature of modern business life, and most multinational corporations organize their operations in this way.[6] Examples of holding companies are Berkshire Hathaway,[7] Jefferies Financial Group, The Walt Disney Company, Warner Bros. Discovery, or Citigroup; as well as more focused companies such as IBM, Xerox, and Microsoft. These, and others, organize their businesses into national and functional subsidiaries, often with multiple levels of subsidiaries.
In descriptions of larger corporate structures, the terms "first-tier subsidiary", "second-tier subsidiary", "third-tier subsidiary", etc. most are often used to describe multiple levels of subsidiaries. A first-tier subsidiary means a subsidiary/child company of the ultimate parent company,[note 1][9] while a second-tier subsidiary is a subsidiary of a first-tier subsidiary: a "grandchild" of the main parent company.[10] Consequently, a third-tier subsidiary is a subsidiary of a second-tier subsidiary—a "great-grandchild" of the main parent company.
The ownership structure of the small British specialist company Ford Component Sales, which sells Ford components to specialist car manufacturers and OEM manufacturers, such as Morgan Motor Company and Caterham Cars,[11] illustrates how multiple levels of subsidiaries are used in large corporations: