HOME

TheInfoList




A corporate group or group of companies is a collection of parent and subsidiary
corporations A corporation is an organization—usually a group of people or a company A company, abbreviated as co., is a legal entity In law, a legal person is any person A person (plural people or persons) is a being that has certain capa ...

corporations
that function as a single economic entity through a common source of control. The concept of a group is frequently used in
tax law Tax law or revenue law is an area of legal study in which public or sanctioned authorities, such as federal, state and municipal governments (as in the case of the US) use a body of rules and procedures (laws) to assess and collect tax A ...
,
accounting Accounting or Accountancy is the measurement ' Measurement is the number, numerical quantification (science), quantification of the variable and attribute (research), attributes of an object or event, which can be used to compare with other ob ...
and (less frequently) company law to attribute the rights and duties of one member of the group to another or the whole. If the corporations are engaged in entirely different businesses, the group is called a
conglomerate Conglomerate or conglomeration may refer to: * Conglomerate (company) * Conglomerate (geology) * Conglomerate (mathematics) In popular culture: * The Conglomerate (American group), a production crew and musical group founded by Busta Rhymes ** Con ...
. The forming of corporate groups usually involves consolidation via
mergers and acquisitions In , mergers and acquisitions (M&A) are transactions in which the ownership of , other business organizations, or their operating units are transferred or with other entities. As an aspect of , M&A can allow enterprises to grow or , and change ...
, although the group concept focuses on the instances in which the merged and acquired corporate entities remain in existence rather than the instances in which they are dissolved by the parent. The group may be owned by a
holding company A holding company is a company whose primary business is holding a controlling interest in the securities of other companies. A holding company usually does not produce goods or services itself. Its purpose is to own shares of other companies ...
which may have no actual operations. In Germany, where a sophisticated law of the " concern" has been developed, the
law Law is a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surrounded and influenced by its environment, is described by its bounda ...
of corporate groups is a fundamental aspect of its
corporate law Corporate law (also known as business law or enterprise law or sometimes company law) is the body of law Law is a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules t ...
. Many other European jurisdictions also have a similar approach, while
Commonwealth A commonwealth is a traditional English term for a political community founded for the common good In philosophy Philosophy (from , ) is the study of general and fundamental questions, such as those about reason, Metaphysics, existenc ...

Commonwealth
countries and the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...

United States
adhere to a formalistic doctrine that refuses to "
pierce the corporate veil Piercing the corporate veil or lifting the corporate veil is a legal decision to treat the rights or duties of a corporation as the rights or liabilities of its shareholders. Usually a corporation is treated as a Corporate personhood, separate legal ...
": corporations are treated outside tax and accounting as wholly separate legal entities.


Legal independence

A corporate group is composed of companies. The general rule is that a company is a separate legal entity from its shareholders, that is the shareholder's liability for the subsidiary's debts is limited to the value of the shares,
Salomon v Salomon is a landmark UK company law case. The effect of the House of Lords' unanimous ruling was to uphold firmly the doctrine of corporate personality, as set out in the Companies Act 1862, so that creditors of an insolvent company could not sue the c ...
and the shareholders cannot be required to perform the company's obligations. However, some jurisdictions create exceptions to this rule. For example, Germany has created affiliated enterprise law which provides situations in which one company is liable for the debts of another company. In New Zealand, the Companies Act provides that the assets of related companies may be pooled to pay the creditors if one of the companies is liquidated. However, the circumstances in which this power will be exercised are very narrow. * '' Berkey v Third Avenue Railway''


Economic dependence

*
Concern (business) A concern (german: Konzern) is a type of Corporate group, business group common in Europe, particularly in Germany. It results from the merger of several legally independent companies into a single economic entity under unified management. A concer ...
* '' DHN v Tower Hamlets LBC'' * EU Seventh Company Law Directive 83/349, on
group A group is a number A number is a mathematical object used to counting, count, measurement, measure, and nominal number, label. The original examples are the natural numbers 1, 2, 3, 4, and so forth. Numbers can be represented in language with ...
accounts * EU Draft Ninth Company Law Directive, on
corporate groups A corporate group or group of companies is a collection of parent and subsidiary corporations A corporation is an organization—usually a group of people or a company A company, abbreviated as co., is a legal entity In law, a l ...


Law


Tax


Accounting

* EU Seventh Company Law Directive 83/349, on
group A group is a number A number is a mathematical object used to counting, count, measurement, measure, and nominal number, label. The original examples are the natural numbers 1, 2, 3, 4, and so forth. Numbers can be represented in language with ...
accounts


Civil law

* ''
Salomon v Salomon is a landmark UK company law case. The effect of the House of Lords' unanimous ruling was to uphold firmly the doctrine of corporate personality, as set out in the Companies Act 1862, so that creditors of an insolvent company could not sue the c ...
'' * '' Berkey v Third Avenue Railway'' * ''
Adams v Cape Industries plc ''Adams v Cape Industries plc'' 990Ch 433 is a UK company law case on separate legal personality and limited liability of shareholders. The case also addressed long-standing issues under the English conflict of laws as to when a company would be ...
''


Codetermination

*
MitbestimmungsgesetzMitbestimmungsgesetz 1976 or the Codetermination Act 1976 is a German law that requires companies of over 2000 employees to have half the supervisory board of directors as representatives of workers, and just under half the votes. Background From 19 ...


Definition

Leff defines business group as a group of companies that does business in different markets under common administrative or financial control whose members are linked by relations of interpersonal trust on the basis of similar personal ethnic or commercial background. One method of defining a group is as a cluster of legally distinct firms with a managerial relationship. The relationship between the firms in a group may be formal or informal.Granovetter, M. (1994). “Business groups,” in ''The Handbook of Economic Sociology'' (J. N. Smelser and R. Swedberg, Eds.), pp. 453–475,
Princeton University Press Princeton University Press is an independent publisher Publishing is the activity of making information, literature, music, software and other content available to the public for sale or for free. Traditionally, the term refers to the creatio ...

Princeton University Press
, Princeton.
A
keiretsu A is a set of companies A company, abbreviated as co., is a legal entity In law, a legal person is any person A person (plural people or persons) is a being that has certain capacities or attributes such as reason, morality, conscio ...

keiretsu
is one type of business group. A concern is another. Encarnation refers to Indian business houses, emphasizing multiple forms of ties among group members. Powell and Smith-Doerr state that a business group is a network of firms that regularly collaborate over a long time period. Granovetter argues that business groups refers to an intermediate level of binding, excluding on the one hand a set of firms bound merely by short-term alliances and on the other a set of firms legally consolidated into a single unit. Williamson claims that business groups lie between markets and hierarchies; this is further worked out by Douma & Schreuder. Khanna and Rivkin suggest that business groups are typically not legal constructs though some regulatory bodies have attempted to codify a definition. In the
United Arab Emirates The United Arab Emirates (UAE; ar, الإمارات العربية المتحدة ) or the Emirates ( ar, الإمارات ), is a country in Western Asia Western Asia, West Asia, or Southwest Asia, is the westernmost subregion A subregio ...

United Arab Emirates
, a business group can also be known as a
trade association A trade association, also known as an industry trade group, business association, sector association or industry body, is an organization founded and funded by businesses that operate in a specific industry Industry may refer to: Economics * ...
.Abudhabichamber.ae
Typical examples are
Adidas Group
Adidas Group
or
Icelandair Group Icelandair Group List of legal entity types by country#Iceland, hf. is an Icelandic travel industry corporation, the owner and holding company of the airline Icelandair and several other travel industry companies in Iceland. The group's headquarte ...
.


See also

*
Business alliance A business alliance is an agreement between businesses, usually motivated by cost reduction Cost reduction is the process used by companies to reduce their cost In production, research Research is "creativity, creative and systematic wor ...
*
Chaebol A ''chaebol'' (, ; ) is a large industrial conglomerate that is run and controlled by a person or family in South Korea. A chaebol often consists of many diversified affiliates, controlled by a person or group of persons whose power over the ...
* Concern *
Conglomerate Conglomerate or conglomeration may refer to: * Conglomerate (company) * Conglomerate (geology) * Conglomerate (mathematics) In popular culture: * The Conglomerate (American group), a production crew and musical group founded by Busta Rhymes ** Con ...
*
Holding company A holding company is a company whose primary business is holding a controlling interest in the securities of other companies. A holding company usually does not produce goods or services itself. Its purpose is to own shares of other companies ...
*
Keiretsu A is a set of companies A company, abbreviated as co., is a legal entity In law, a legal person is any person A person (plural people or persons) is a being that has certain capacities or attributes such as reason, morality, conscio ...

Keiretsu
*
Subsidiary A subsidiary, subsidiary company or daughter company is a company (law), company owned or controlled by another company, which is called the parent company or holding company. Two subsidiaries that belong to the same parent company are called sis ...
*
Zaibatsu is a Japanese Japanese may refer to: * Something from or related to Japan , image_flag = Flag of Japan.svg , alt_flag = Centered deep red circle on a white rectangle , image_coat ...


Further reading

* Schmitthoff CM, and Wooldridge F, (eds), ''Groups of Companies'' (Sweet & Maxwell 1991) * Blumberg PI, ''The Law of Corporate Groups: Tort, Contract and Other Common Law Problems in the Substantive Law of Parent and Subsidiary Corporations'' (Little, Brown and Company 1987) * Witting C, ''Liability of Corporate Groups and Networks'' (Cambridge University Press 2018) * Morris CHR, ''The Law of Financial Services Groups'' (Oxford University Press 2019)


Notes

{{Authority control Business terms Types of business entity Strategic management