Let’s get to know Holding Company

Normally, most companies earn their income from selling goods or services, however, there is one business structure that does not operate any goods and services manufacturing but still earn income from being the holders of shares in other companies. This structure is called ‘Holding Company’ ACU PAY will summarize details of the Holding company for you.

What is a Holding Company?

A Holding Company is a company established with the income from holding shares in other companies, which may have its own core business or hold shares in other companies alone. For holding shares, the Holding Company must hold at least one of its principal companies to represent its participation. If the principal company is a general company, the Holding Company must hold more than 50% or if the principal is invested with other bases or conditions, the Holding Company must hold shares more or equal 40%. The Company will be required to hold shares in its principal company all the time of listing and will change its principal company after more than three years since the beginning of the common shares trading in the stock market.

The advantage of being a Holding Company

Stable and low-risk

The company is large, stable, and strong with diversified investment risk due to its diverse holdings in various businesses. The likelihood of a crisis that will happen to businesses at the same time is difficult or little. Also, there is a lower risk of operating in a single company.

In addition, dividends can be paid at a high rate because holding companies usually invest in profitable businesses and generate high cash flow to pass on the returns to shareholders.

Reduce the cost of loan financing

Due to its strong financial status and high creditworthiness, the Holding Company can provide funds to the share-hold companies and often receive loans at lower interest rates than its subsidiaries, thus expanding growth through investments in both related and non-traditional businesses.

Clear liability for the debt

If the subsidiary has a problem with liabilities arising in the name of its subsidiary, it will not affect other parts of the holding company due to separate operations or assets. Therefore, creditors of its subsidiaries will not be able to access other holding companies’ assets.

No need to manage the company on its own

Holding Company can own several subsidiaries for security and sustainability, as the Holding Company management does not have to manage by itself because there are already specialists in each business. Holding Company only holds shares and receives returns from each company.

The disadvantages of being a Holding Company

Complicated

If the holding company’s management structure is not well established, a management complex may arise. In addition, conflicts with executives of the holding company may arise.

High cost of establishment

The registration of both the Holding Company and its subsidiaries will be subject to establishment fees and cost of preparation, due to a large amount of fees and more complex tax preparation.

Example of the Holding Company

1. INTOUCH: Intouch Holdings Public Company Limited

Investment in telecommunications, media, technology and digital businesses. The Holding Company can be divided into three main business lines: wireless telecommunications, satellite and foreign businesses and other businesses.

2. BTS: BTS Group Holdings Public Company Limited

The company operates four main types of business: investment in the mass transit sector, followed by advertising media, real estate and services.

3. PTT: PTT Public Company Limited

Invest in gas and pipeline businesses. In addition, petroleum exploration and production, liquefied natural gas, petrochemicals and refining, oil and retail, electricity and utilities, coal, and services.