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When running a successful business, you may wonder what next steps to take to grow your business further. One possible option is creating a holding company and making your company a subsidiary company. It is easiest to understand holding and subsidiary companies like a parent-child relationship. This article will outline how to create and register these companies. It also explores the benefits to creating a holding company and whether this is possible if you live overseas.

What is a Holding Company? 

A holding company is slightly different from a traditional company structure. They are also known as a parent company, which is a good analogy for its functions. A holding company holds the assets of its ‘child’ company – a subsidiary – in its own name. The holding company owns the assets, while the subsidiary company controls the business’ day-to-day operations. 

These assets are often:

  • intellectual property;
  • physical property;
  • capital; and
  • equipment. 

If your company is highly successful and has experienced tremendous growth, you could establish a holding company. This will typically make your existing company a subsidiary, as it will already be experienced and functional at running the operational side of the business. 

Requirements to Create Holding and Subsidiary Companies?

If you decide that you would like your company to become a subsidiary and want to set up a holding company, there are a few steps you will need to take. You cannot just simply assign a company to a holding company, and it, therefore, becomes a subsidiary company. 

In New Zealand, there are a few requirements for a company to meet before being considered a subsidiary of a holding company. A company is most likely a subsidiary if it has another company that:

  • controls the makeup of its board;
  • has more than half of the number of votes at company meetings;
  • owns more than half of the shares – is a majority shareholder; and
  • receives more than half of every share dividend. 

Therefore, holding companies must have a significant level of control of their subsidiaries. Such control is known as a controlling interest.

How Do I Formally Register a Holding Company?

If you are creating a holding company, you will need to notify the Companies Office. As with a traditional limited liability company, you need to go through the complete registration process to register a company and ensure that it is on the Companies Register. Therefore, the holding company will need:

  • a unique name;
  • physical address;
  • contact address;
  • at least one share, shareholder, and director. 

While holding and subsidiary companies are slightly different, it is still essential to register a holding company with the Companies Office. Formal registration ensures that your holding company goes on the Companies Register and legally becomes a separate entity. This will be legally important if you transfer assets from the subsidiary into the holding company. 

Benefits When Registering a Holding Company?

A holding company can have several benefits for your business. If a holding company holds your company’s assets, they will be protected if someone sues the subsidiary company. Additionally, a holding company can own several subsidiary companies, and make centralised decisions for the subsidiary companies. Indeed, this can streamline processes for your subsidiary companies. 

Additionally, it allows all subsidiary companies to operate more flexibly with the knowledge that a larger company protects them. 

I Live Overseas. Can I Create a Subsidiary Company in New Zealand?

You might be an overseas holding company wanting to open subsidiary companies in New Zealand. If so, it is essential to know that the subsidiary will be considered a tax resident. Therefore, you will need to ensure that at least one of the company directors lives in New Zealand. Generally, they will need to be a formal resident and live here at least half of the time. You will additionally need to register the subsidiary with the New Zealand Companies Office. 

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Key Takeaways 

Creating a holding-subsidiary company structure can be an exciting step to expanding your business. This will both protect your company but also allow opportunities for growth. However, there are several requirements when setting up a holding company, and it is essential to follow the process correctly. 

If you want to learn more about holding companies, our experienced business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.

Frequently Asked Questions

Do I need to inform the Companies Office if my company becomes a subsidiary company?

Yes. You must inform the Companies Office if your company becomes a subsidiary. Otherwise, your details will be incorrect on the register and may lead to trouble in the future.

Can I create subsidiary companies in New Zealand as a non-resident?

Subsidiary companies created in New Zealand will need at least one director to be a resident. This typically means someone who lives in New Zealand half the time and has resident status. 

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