Holding company is that form of business combination which is formed for the purpose of owning and controlling the amount of stop of other companies. So the companies which hold the securities of other company is called holding company; and the company who's shares are purchase by the holding company is known as subsidiary company. Generally both companies engage in the same or similar nature of business activities. A company may itself be holding company and at the same time be a subsidiary to another company. In order to become holding company, at must hold majority of the shares of others companies. It can thus nominate majority of the directors in the board of directors due to voting rights in the subsidiary company. Therefore it is economic device used for the object of controlling the sources of another company. The concept of holding company was first originated in U.S.A. When the trust was declared illegal by the court it was related to replace trust organization. Advantages: - The following are the general advantages of the holding company. 1. Simplicity in formation. Holding company can be formed very easily. There are no legal formalities for its formation. Any company may become holding company by purchasing majority of the shares from the stock exchange market. The consent of the subsidiaries is also not necessary for its formation. 2. Large capital. The amount of capital can be increased as the result of the holding company. 3. Stability. It is stable and strong form of combination. Its life is nit affected by the disagreement of any subsidiary company.
