By Luisa Bombarda and Layon Lopes
Holding is a type of organisation which is created in order to participate in other companies. This occurs through the holding of shares of these companies’ capital stock. Thus, the holding company starts to control them, which configures the domain of one company over another.
What is a holding company establish for? The main purposes are asset protection, hereditary succession and tax savings. Know in advance that any company or individual can take advantage of this legal mechanism.
So, this type of organisation is a company like any other. That is, it is incorporated in accordance with a defined corporate type, usually a corporation, but can also be a limited liability company.
It is important to highlight that there are several types of holding according to current legislation, having these corporate or organizational characteristics. In order to choose the best corporate type, the objectives, advantages and disadvantages must be considered, as well as when choosing any business. Below, we indicate the main types of holdings:
This type of holding is characterized because its aim is to manage the controlled companies, directing the operating policies to be followed and offering the necessary financing for their businesses. In this case, the holding does not carry out any type of operation, being restricted to participation in the share capital of another company.
A mixed holding company not only controls another company but also engages in its own operations, taken part in completely unrelated lines of business from their subsidiaries are referred to as conglomerates.
It is an asset manager, that is, it may have the target of prosecuting the anticipation of the inheritance to its heirs and spouse. Thus, the person who holds the equity builds a holding, transfers to it all its assets and rights and donates to its heirs the shares of the formed company, with usufruct clauses in favour of the donor, clauses of reversal, inalienability and incommunicability, etc.
It can also be incorporated in order to facilitate the management of the assets of families that have numerous assets. It is very common when there is real estate, in which case the holding company is committed to managing these assets, generating tax and inheritance benefits, participating in the rental, purchase and sale of properties.
In order to optimise corporate control as it holds the share capital and becomes responsible for all the decisions of the economic group, there is this type of holding, the management holding.
To sum up, a holding company is one that individuals form for the purpose of purchasing and owning shares in other companies in order to gain more control at a small investment, or retaining the management of the subsidiary firm and also to reduce tax liability.
* Layon Lopes is the CEO of Silva | Lopes and Luisa Bombarda is a member of the Silva | Lopes team.