Subsidiary

“ If a parent company and its subsidiary company in aggregate hold, or a subsidiary company by itself holds, more than 50/100 of the total issued and outstanding shares in another company, such another company shall be deemed as a subsidiary company of the parent company for the purpose of the application of this Act. ”

“ An upstream guarantee is when a subsidiary guarantees the debt of its parent; a downstream guarantee is when a parent corporation guarantees a debt of its subsidiary; a cross-stream guarantee is when a corporation guarantees the debt of an affiliate. ”

“ This is often desirable because of the value of the good-will accruing to the constituent companies from years of business dealing with their customers. The advantages of the close consolidation may be often obtained by stimulating rivalry between the various plants of the same industry and by exchanging information as to successful methods of operation.
A holding company does not generally own all the stock of the subsidiary. ”

“ In determining whether a body corporate is a subsidiary of another body corporate:
(a)
any shares held or power exercisable by that other body corporate in a fiduciary capacity shall be treated as not held or exercisable by it ”

“ After stating that 'affiliation' implies a 'stronger bond' than 'association', he went on to say: 'In the corporate field its use embraces not the casual affinity of an occasional similarity of objective, but ties and connections that, though less than that complete control which parent possesses over subsidiary, are nevertheless sufficient to create a continuing relationship that embraces both units within the concept of a system. ”

“ For purposes of this subtitle, if any corporation which was a qualified subsidiary ceases to meet the requirements of clause (ii) , such corporation shall be treated as a new corporation acquiring all of its assets (and assuming all of its liabilities) immediately before such cessation from the corporation or trust described in subparagraph (A) in exchange for its stock. ”

“ The shareholders of the subsidiary companies may be thus practically deprived of power to protect themselves against injurious measures and even to obtain information of what the holding company is doing, or intends to do, with their property. ”

“ The inland or home trade, the most important of all, the trade in which an equal capital affords the greatest revenue, and creates the greatest employment to the people of the country, was considered as subsidiary only to foreign trade. ”

“ In case where there exists a consent by all shareholders of the company becoming a complete subsidiary or where the company becoming a complete parent company owns 90/100 or more of the total number of shares issued by the company becoming the complete subsidiary, an approval of the shareholder's general meeting of the company becoming the complete subsidiary may substitute for an approval of the board of directors. ”

“ As a first step toward mitigating this evil we suggest that the shareholders of subsidiary companies, which are dominated by holding companies, or voting trusts, shall have the same right to examine the books, records, and accounts of such holding companies, or voting trusts, that they have in respect of the companies whose shares they hold, and that the shareholders of holding companies have the same right as regards the books, records, and accounts of the subsidiary companies. ”

“ The affairs of the company have been conducted with great perseverance, the exploitation of the territory by means of planting, mining, and industries of various kinds having been handed over to subsidiary companies created for the purpose, while the parent body maintains its position as overlord, administering the whole territory. ”

“ Again, the difference between private and public companies must be considered; a private company which employs a great mass of capital and large numbers of work-people—a concern which may cover a whole town or district—should in the public interest be subject to the same rules as a public company. Thirdly, in view of the amalgamation of industry, the linking up of company with company, there must be reconsideration as regards publicity in the case of subsidiary companies. ”

“ The system of participation, with which we are already acquainted, leads to the same result. The Société Générale, for instance, issues 64,000 bonds of one of its subsidiary companies, the Egyptian Refineries. ”

“ A reference in this Act to the holding company of a body corporate shall be read as a reference to a body corporate of which that other body corporate is a subsidiary.
(5)
Where a body corporate:
(a) is the holding company of another body corporate ”

“ Since, however, a corporation cannot remain stationary—it must usually record a gain or a loss from year to year—ownership in that corporation must accordingly suffer change from year to year. So many things can happen to an operating corporation that cannot befall an inanimate asset held for use that the proposal to value both on the same basis is hardly tenable. Furthermore, if proper principles of valuation are applied to the subsidiary concern, its true value can be determined with fair accuracy. ”

“ Insurance companies, express companies, and, indeed, companies organized for almost every kind of business, are, by comity, permitted throughout the United States, and generally throughout the civilized world, to do business, make contracts, and exercise their corporate powers in a jurisdiction where, in a strict legal sense, they have no corporate existence. The Pacific Mail Steamship Company, for example, to take an illustration mentioned by counsel, is a corporation created under the laws of the State of New York, and, like the Central Pacific, has been subsidized by the United States. ”

“ In all decisions and acts of the Corporation and subsidiaries pertaining to employees and employment their interests are of highest importance. In wage rates, living and working conditions, conservation of life and health, care and comfort in times of sickness or old age, and providing facilities for the general welfare and happiness of employees and their families, the Corporation and subsidiaries have endeavored to occupy a leading and advanced position among employers. ”

“ Its creation (except where the corporation is sole) is the investing of two or more persons with the capacity to act as a single individual, with a common name, and the privilege of succession in its members without dissolution, and with a limited individual liability. The right and privilege, or the franchise, as it may be termed, of being a corporation, is of great value to its members, and is considered as property separate and distinct from the property which the corporation itself may acquire. ”

“ If the corporation receiving such other property or money does not distribute it in pursuance of the plan of reorganization, the gain, if any, to the corporation shall be recognized, but in an amount not in excess of the sum of such money and the fair market value of such other property so received, which is not so distributed.'
This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105) . ”

“ The holding corporation can itself be controlled by the ownership of 50 or 51 per cent of its stock, and the control of its subsidiaries is obtained with stock ownership in the same ratio. Thus a relatively small capital investment may exercise a far-reaching control.
A holding company as a rule buys up the controlling stock interest of the companies in which it is interested, and elects its own men on the board of directors of the subsidiaries. Frequently the larger stockholders of competing corporations get together and form the holding company. ”

“ The general power to perform all corporate acts refers to the ordinary business transactions of the corporation, and does not extend to a reconstruction of the body itself, or to an enlargement of its capital stock. A corporation, like a partnership, is an association of natural persons who contribute a joint capital for a common purpose, and although the shares may be assigned to new individuals in perpetual succession, yet the number of shares and amount of capital cannot be increased, except in the manner expressly authorized by the charter or articles of association. ”

“ Fifty years ago, the great majority of business operations were conducted either by individuals or by partnerships. To-day, especially in conducting large business [Pg 122] enterprises, corporations have replaced individuals and partnerships. Although (as we shall see later in the chapter on corporations) in law a corporation is deemed a separate, legal entity, distinct from the stockholders, in actual practice we know that there is no such distinct physical being as a corporation. It follows, therefore, that every act performed by a corporation must be performed through an agent. ”

“ George’s Company other than a voluntary association of persons which the law will not recognize as a corporation.
“The Companions of St. George will be capable of holding land, but not as the St. George’s Company,—that is, not as a corporation. Land must be held by or for them as individuals. You may have a piece of land conveyed to, say two hundred Companions; naming each of them; but for the sake of convenience [233] you would have it conveyed to two or three who should hold it upon trust for the Companions generally. ”

“ The economic entity of a railway company may be constituted a special economic corporation for the purpose of mortgage. [2]
(b) In default of payment of the mortgage liability, the whole, i.e. the corporation, may be subjected to auction. This provides the means for transferring, together with the material properties, the original permission of the Government, namely, the licence, to the purchaser, viz. a new company.
(c) A company, which in reality may be taken as a syndicate, may be formed for advancing money by means of debentures. ”

“ The first declares:
'A fraternal beneficiary association is hereby declared to be a corporation, society or voluntary association, formed or organized and carried on for the sole benefit of its members and their beneficiaries, and not for profit. Each such society shall have a lodge system, with ritualistic form of work and representative form of government.'
The remaining sections relate to the organization and government of domestic corporations and provide for reports by and the licensing and duties of such corporations when organized in other states. ”

“ The consumers’ theory maintains that all profit on price is abstracted from the consumer, and must be returned to him; while to him should also belong all capital and control, subject to such regulations as the state and the trade unions enforce. This theory is fully exemplified in the English Wholesale Society, and in some of the smaller federations for production, which employ workmen, whether co-operators or not, for wages only, and admit no individual, but only co-operative societies, to membership. ”

“ Regulated companies resemble, in every respect, the corporation of trades, so common in the cities and towns of all the different countries of Europe; and are a sort of enlarged monopolies of the same kind. As no inhabitant of a town can exercise an incorporated trade, without first obtaining his freedom in the incorporation, so, in most cases, no subject of the state can lawfully carry on any branch of foreign trade, for which a regulated company is established, without first becoming a member of that company. ”

“ Warehouse Co. v. Tobacco Growers, 273 U.S. 71, 48 S.C.t. 291, 72 L. Ed. 473. A corporation organized under the act of 1919, however, has capital stock, which, up to a certain amount, may be subscribed for by any person, firm or corporation; is allowed to do business for others; to make profits and declare dividends, not exceeding eight per cent. per annum; and to apportion the remainder of its earnings among it members ratably upon the amount of products sold by them to the corporation. Such a corporation is in no sense a mutual association. ”

“ Besides these territorial corporations for purposes of government, as counties, towns, cities, &c., there are incorporated companies for carrying on business of various kinds, as turnpike and rail-road companies, and companies for the purposes of banking, insurance, manufacturing, &c. These kinds of business, to be carried on successfully, sometimes require a larger amount of money than one man possesses. A number of persons, therefore, unite their capital under an act of incorporation granting them power to manage their business which they could not have in an ordinary business partnership. ”

“ It may sometimes even be modified by the fact that the product as turned over by one company to another is in such stage of completion that there is a ready market for it outside that of the allied subsidiaries. ”

“ The producer cooperative seeks to return to its members the largest possible portion of the dollar necessarily spent by the consumer for the product with deductions only for modest distribution costs, without profit to the membership cooperative and with limited profit to the stock cooperative. ”

“ The argument supposes the corporation to have been originated for the management of an individual concern, to be founded upon contract between individuals, having private trade and private profit for its great end and principal object. ”

“ An [Pg 3] open corporation is one in which ownership of the stock is not held closely but is being passed about, traded in, or transferred from one owner to a new. A close corporation is one in which the stock is held very closely in order to retain control and keep profits and trade secrets within a small compass of ownership. Thus some corporations are strictly family affairs; others are held by a few families or a small group.
What is known as a corporation “sole,” while little known now, virtually exists in some close corporations, as where one man holds all but two shares of stock. ”