Parent Company

A parent company is a business entity that owns a majority stake (more than 50%) in the voting shares of another company, known as its subsidiary. This ownership gives the parent company the power to influence, control, or manage the subsidiary’s operations and policies.

Key Features Ownership Holds majority voting rights (>50%) in the subsidiary. Can exercise control over decisions like appointments of directors, financial policies, and strategic direction. Control Can directly or indirectly govern the subsidiary’s operations. May influence day-to-day management or leave operational autonomy to the subsidiary. Financial Reporting Parent company usually consolidates the financial statements of its subsidiaries for reporting purposes. Subsidiary’s profits or losses may impact the parent company’s consolidated accounts. Legal Distinction Parent and subsidiary are legally separate entities, though the parent exercises ownership control.

Example: Company A owns 70% of Company B. Company A can influence major business decisions of Company B and will consolidate its financials in its own reporting. Company B continues to operate as a separate legal entity.