Explain classification of companies on the basis of ownership.
Answers
On the basis of ownership or control, companies may be classified into three categories, i.e. (1) Holding company, (2) Subsidiary company, and (3) Government company. (1) Holding Company: A holding company is a company which holds majority of shares of another company.
Answer:
On the basis of ownership or control, companies may be classified into three categories, i.e. (1) Holding company, (2) Subsidiary company, and (3) Government company.
(1) Holding Company:
A holding company is a company which holds majority of shares of another company. Such company exercises control over the composition of Board of Directors of the other company and is in a position to influence the formulation of policy
(2) Subsidiary Company:
A company is known as a subsidiary company when (a) the composition of its Board of Directors is controlled by another company; or (b) the other company holds majority of its equity shares; or (c) the other company controls more than half of its voting rights; or (d) it is a subsidiary of another subsidiary company.
(3) Government Company:
A Government company means any company in which not less than 51 per cent of the paid-up share capital is held by the Central Government, or by any State Government or Governments, or partly by Central Government and partly by one or more State Governments and includes a company which is subsidiary of the Government company. Some of the examples of Government companies in India are : Coal Mines Authority Ltd., Steel Authority of India Limited and National Aluminum Company Ltd. etc. Entrepreneur has no scope for this type of company.
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