Holding Companies Explained
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- Опубликовано: 23 июл 2024
- If you would like any assistance with registering a holding company in South Africa (which is the same a normal Pty Ltd), please use the following link:
www.swiftreg.co.za/Swiftreg/p...
We at SwiftReg look forward to assisting you. We have a dedicated call center 021-595 44 33 (available during business hours) alternative please browser our website on www.swiftreg.co.za/index.aspx for more services.
And now for the video script... :)
In this video I am going to explain everything you need to know about holding companies or parent companies as some people refer to them. I’ll explain how the company group structure works and when you should consider registering a holding company.
To start let’s look at the definition of a holding company. The Oxford language defines a holding company as “a company created to buy and own the shares of other companies, which it then controls”
Therefore holding companies do not produce any goods or services, they simply holds assets. These assets are usually shares of other companies but they could also be properties, trademarks or patents. The key difference is that holding companies just hold assets while operating companies run the day to day operations of the business.
Registering a holding company is no different from registering any other regular company. In South Africa most holding companies are therefore standard (Pty) Ltds. The only difference is the purpose for which the Pty is registered which is to hold assets rather than trade and the fact that the holding company owns the shares of the trading company. Trusts and CCs can therefore also be holding companies, but it is important to remember that Trusts are taxed at a higher rate than companies and CCs are not as flexible in terms of shareholding as Pty’s. This is why Pty’s remain the preferred type of holding company in South Africa.
So why would people want to register holding companies? There are two main reasons, first to reduce risk by separating the asset away from the operating business and into a separate legal entity.
A typical example would be; if a restaurant owner owns the premises in which his restaurant operates. In this example it would be advisable for the owner to register 3 companies. Company A (the holding company) will own the shares of the other 2 companies. Company B will own the building and charge rent to company C which will own the operating company of the restaurant. This keeps the liabilities of the separate entities separated so that if company C fails, the assets in Company B are not impacted due to the limited liability protection.
The second reason why people own holding companies is it allows one company ownership and control over a number of different businesses. The best global example of this is the world’s number one investor Warren Buffet who’s company Berkshire Hathaway controls and owns hundreds of different companies. This control allows him to appoint directors through voting rights linked to his shares in the respective companies or subsidiaries.
We often meet enthusiastic entrepreneurs wanting to set up complex group company structures based on their grand ideas even before the intended businesses have even started. I understand their intention as they would like to get organised by putting the group company structure in place even before the respective businesses have started.
My advice is that you do not have to set up the group company structure from the outset as you can always add new operating companies as and when they get off the ground. In fact, you could even register holding company years after the operating companies are up and running and then transfer your shares of the operating company to the holding company. To register and maintain a group of companies is also expensive so only register the operating and holding companies one at a time and when it makes financial sense to do so.
From an accounting perspective a group company structure can be more complex than initially anticipated as companies can create loan accounts between each other by raising finance and transferring the funds between companies. This attracts interest and therefore has tax implications.
A group company structure can also be complex from an ownership perspective as the operating companies can have any combination of shareholders, not just the holding company. For example in the construction industry a new operating company is often created as a joint venture between different businesses for a specific project, usually a large civil engineering project and the shareholding of the joint venture is held by the respective holding companies.
I hope this video has been informative. As always remember WE ARE HERE TO HELP 
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Finally i find SA based company law related content
Glad we could help
You can say that again!!! Finally
Your content is very much appreciated. Please do not stop ever producing content for us. May God bless you for this. Sharing such knowledge is just so kind of you.
So nice of you
Simple and yet complete explanation of a complex subject. I am also glad you brought up the fact about how holding companies increase complexity for you Accountants and Lawyers. That should not dissuade someone from using this concepts. In the US my CPA tells me sometimes people are shocked when he charges them separate fees for filing tax forms for each of their companies!!
Hi DAL-ADX, thanks for watching and taking the time to respond. The concepts of holding companies are universal be it in the US or South Africa. If you understand the concepts and are aware of the extra costs there are obvious benefits.
That's fine
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Have you had about peakminers investment company before?
Very simple. Easy to understand. Thanks.
Glad it was helpful!
Thank you so much for explaining this term in its simplest form.🙂👍
Glad it was helpful!
It's very clear to me now. Thanks 👍
Glad it helped
Thank you very much for the simple explanation.
You are welcome!
Good content with clear explanations. thanks
Glad it was helpful!
Thanks man cleared up a lot !
Glad it helped!
It's super informative, and it has helped me a lot more in clearing my vision for my company, Ellen-Queens Enterprises (Pty)Ltd. Because I want this company of mine to do solely one thing, to hold, control and protect all of my assets and companies/acquisitions. Thank you so much.
Hi there, thank you for the sincere compliment. It really motivates me to make more.
Greetings, Great Responce though I have a question. If the HC protects what if your LLC gets sued... what will/can that do to your HC or Trust?
Thank you. This very informative.
Glad it was helpful!
This was great! Thanks!
Glad you enjoyed it!
You got yourself a new subscriber. Thanks for sharing such vital information 👍🏿
Awesome, thank you!
This was so informative.
Thank you :)
Thank you for the help
Any time!
Thank u for the video
My pleasure
We need another video about different between (PTY LTD) (Limited) (PLC) (CC)
Thanks for the suggestion, I will add it to the pipeline.
Just gain a subscriber. Very informative
Awesome, thank you!
Well explained
Thank you :)
Thank you sir for information 🙏 from nepal
Hi Laxmi, I am glad it was helpful
Very informative
Glad it was helpful!
Thank you
Your welcome
great!
Thank you :)
Thank you sir
You are Welcome!
Can you do a video on equity structure and finance structure for a holding company with subsidiaries
Hi Sheba, thank you for the suggestion, yes I will add it to the pipeline.
Great info, very well explained, I think its all the same here in Australia, one question though, if you create the holding co later on, would you be up for stamp duty implications and capital gains tax once transferring to the holding co later on? is it technically classes as a sale of shares?
Hi there, yes you are correct. However, as the is no central Registrar for shareholding of private companies. The only authority who who will eventually have access to the shareholding will be the tax authorities. This means you could amend the structure before you submit your financials. I would discuss this restructuring with your Accountant beforehand as I am sure they will advise you correctly.
@@swiftreg thank you sir for clarifying this to me!
I think in Australia the central register is ASIC as you have to submit all registers through them on ownership of shares and change of company details etc
@SwiftReg Company Registration how do you find out who the ultimate beneficial ownership is of the holding company front SARS?
Hi Alan you can request this information from the directors in terms of POPIA and they have to provide it. They may charge a nominal fee for the information. However, SARS will also have this information as it must be reported in the financials. I hope this answers your question.
hi , i have a homework for school and i don't know if an insurance parent company is a holding one because for me it kinda provides services tho. (for example meiji yasuda) thank you in advance
Hi there, Meiji Yasuda is an insurance trading company which also owns many subsidiary companies. Therefore it is both a parent (holding) company and a trading company.
@@swiftreg thank you !!!
Very informative 😅
Thank you :)
Hi, thanks you for making this video. I have a question, I am trying to understand that part where you said that registering a holding company is no different from registering any other regular company in South Africa. Does this mean that I can register a holding company with CIPC all i need is to call/name it a holding company? Or there's a different structures/steps to set up a holding company from a trading pty?
If the answer is yes can you please make a video to show the differences on registering a holding company and a trading pry and why the trading pty can not act or behave like a holding companies in terms of set ups. 🙏
Hi there, you can register a holding company with CIPC just like a normal company (Pty) there is no additional steps nor any additional procedures.
I hope my question is understable
So how do you transfer shares of the companies that are under the holdings companies since
What is the paperwork and steps to do that
Hi Wandile, great question. All share transfers follow the same procedures regardless whether it is a holding company or not. The transfer should be recorded on a signed directors resolution and the new share certificates issued and signed by both parties. The old share certificates must be cancelled. Please use the following link.
www.swiftreg.co.za/Swiftreg/products/Share_Certificates.aspx
However If you would like a more comprehensive company registered which captures all shareholder transfer since inception you could use the following link.
www.sharevault.co.za/
I hope this answered you question.
Great video what is the relationship between a company and a division of a company
Hi Info, a division of a company is an internal section of the same company, for example: Tesla can have a manufacturing division and the battery division; both are separate units working for the same company. Most importantly division are not separate legal entities.
Thank you - good job! Did anyone try to set up holding company in Estonia?
Hi Eesti, thank you for the compliment. For now, we only operate in South Africa.
@@swiftreg Ok - I guess you enjoy sunny weather :) Have a nice day
So I have three amazon stores LLC's , are you saying all I need is one LLC additional and for the 3 LLC's I put that one LLC as the single member (aka owner) and poof I have a holding company? I was thinking of going s corp election status, if I did this would i just then make the one LLC holding s corp elected and that's all? am I correct?
Hi there, for the first part of your question the answer is YES, I would however advise you speak to your accountant as a transfer of ownership will constitute a sale and may attract a tax event. I am based in South Africa and we different tax regulations here. This is not a definitive answer but I hope it helps you and btw congratulation on your 3 stores.
Are the South African company laws similar to the Australian company laws/structures?
Hi Jack, yes as they are both based on English law
This is a beautiful video. I have two questions though.
1. If I have no interest in running an operating company, but I always get presented by local businesses with opportunities to invest for an exchange of shares, Is it a great idea for me to specifically register a Holding Company just to hold those shares?
2. Will it be easy for me to use my Holding Company (Let's say a Private Holding Company) to acquired shares in companies listed on the Global Stock Market (e.i. Apple, Tesla, etc)?
Hi Hafunda, thank you for the compliment. Yes, if I were you I would register a private holding company to own shares in the respective companies you intend to invest in. There are plenty of advantage of registering a company be it a holding company or a trading company as explained in this video ruclips.net/video/_CAYSrmUSjk/видео.html
Regarding your second question. I assume you are in South Africa and if this is the case you would need to consider exchange controls which is regulated by the reserve bank. I would suggest you make an appointment with various investment houses or banks (Investec, Sanlam Old Mutual) to discuss your strategy and what options are available to you. I hope this answers your question.
@@swiftreg Thank you for your kind response. I am actually based in Namibia, a neighbouring country to ZA, so I presume the process works the same here regarding your answer to my second question as we also have Sanlam and Old Mutual here, so I will definitely do that.
Thank you.
Can you please explain how do you transfer shares of the operating company to the holding company
Hi Yanga, I assume you would like the holding company to own 100% of the operating company. If this is the case then all the issued shares must be transferred to the holding company meaning the old share certificates must be cancelled and a new share certificate issued. The new share certificate must be in the name of the holding company and have the distinctive number range of all the issued shares and be signed by the directors. The transaction should also be written up in the company register. You could try our website www.sharevault.co.za to help you or call our office on 021-5954433
Hi! I have a question. I work for a company and most of the employees are working (contract wise) for the holding company. At the same time, there a a few employees which work for the legal entity one with almost the same name. We all work under the same roof anyway so I am wondering why aren't we all working for the legal entity instead of the holiding company? Because, as far as I understood from your video, the legal entity just holds shares and interests and does not produce anything. Can you help me clarify this? Thank you!
Hi Andrei. This is an unusual situation. It sounds to me that the holding company is not behaving like the traditional holding company but more like an operating company despite it being called a holding company. This is not illegal.
The fact that some employees (working under the same roof and I assume for the same management) are working for a separate company with a similar name is also unusual. I would ask the directors of the company's why this is the situation, maybe there is some type of incentive for small business linked to number of employees or foreigners. This will depend on which state and country the business is operating in.
I hope I have answered your question.
@@swiftreg get ready for this… I work at an emergency vet hospital (one practice), which rents out space to 4 other practices. Each with their own management group and owners…. We have a 2 floor building with with 1 break room.
It’s hell.
Great content, if you have a holding company registered with the cipc, do you also have to register the subsidiaries with the cipc aswell?
Hi Hlulani, yes each company must be registered individually.
How does one register a company under a holding company in the cipc website?
Hi there, holding companies are registered in the same way as any other company, the differentiating factor is the shareholding. CIPC for some crazy reason does not ask for the shareholding during registration process therefore you can register the company and issue or transfer the share to the company at any future date. The company will then be called a holding company once the shares have been transferred. I hope this answers your question.
Question, how does a Holding Company register other companies with CIPC, when putting Directors details, does one put Holding Company as a Director of said company? 🤓
Hi there, when registering a company with CIPC they (CIPC) do not require the shareholders (owners) information of the company only the directors (managers). Remember directors can only be naturals people. I hope this answers your question.
How do you go about officially linking subsidiary companies to a holding company in South Africa?
Hi Ozzie, it is all done through the shareholding. The Registrar of Companies in South Africa (CIPC) does not keep records of share registers for private companies. It is the responsibility of the directors to keep their own records. These shareholding records are eventually be disclosed to the South Africa Revenue Service (SARS) as part of your annual financials.
@@swiftreg thank you, been searching everywhere for guide on how to do that
once registered the holding company. can a holding company apply for credit card or business line of credits?
Hi Kary, yes it can, however it may be more tax efficient to link the credit cards to one of the operating companies. The operating companies are the ones that generate the income and certain credit card payments can be tax deductible expenses which reduces the profit in the operating company resulting in less tax payable. I suppose it depends on what your strategy is. Pay less tax or show more profit.
Do we register a holding company as the same as trading on CIPC or they differ in registration process? or where do we clear the air that one is trading or holding company?🙏🏿🙏🏿🙏🏿
Hi Siir Gotta, holding companies are registered in exactly the same way as normal trading company on CIPC, remember the difference is in the shareholding. CIPC does not capture the shareholder information nor issue share certificate. I would recommend you use 1200 shares as your authorised share capital. If you get stuck or would like some help in registering your holding company please try www.swiftreg.co.za or call our call center on 021-5954433
Hi, how can I have my holding company as the main and sole owner of a company on my CK (CIPC) document?
Hi NW, In South Africa CK documents refer to Close Corporations and Close Corporation can only be owned by individuals or Trusts but not other companies. Therefore the CC could be the holding company with you as the 100% member (owner) and the Operating Companies (must all be Pty Ltd's) can be owned by the CC where the shareholding of the Pty's are in the name of the CC. I hope that makes sense to you.
Great video, I have a question.. is the Holding company buying public or private company?
Hi Hamdan, I can be either. The concept is the same.
Do holding companies required to report financials like balance sheet on annual basis ?How can one confirm solvency of HOLDCO?
Hi VA, all companies are treated the same regarding tax compliance, so yes holding companies must complete tax returns which means they would need to have up to date financials which will include income statements and balance sheets.
@@swiftreg Thank you!
Does this mean I’d need different bank accounts for each company? I know this might be a dumb question but
Hi there, yes each legal entity must have their own account.
Just a quick question, I'm about to open a second business and thinking of opening a holding company as well. How does the accounting side work?
Let's say company A has 20% profit and company B has 50% profit, Now do you pay the profit over to the holding company, and companiy A and B will have an R0 tax return and the holding company pays all the tax?
If yes then I need to know what will that be called on an invoice type, for example, royalty paid or Something for later to show a track record
Hi Coenie, yes you can transfer the money between companies. Just be aware that this will be captured as a loan accounts which attract interest. Therefore company A & B will receive interest (which is taxable) from the holding company as they would have loaned the money to the holding company. This is a very complex tax topic and I would recommend you consult a specialist.
@@swiftregi do my accounting myself, so would prefer to learn how that works. I don't think a loan will work as this will put a negative on the holding company when they want to apply for credit.
I think the way to go might be paid over as royalties and then from there the holding company has no debt and a clean credit score. Not 100% sure but will findout. Thanks
I was advised to open a a holding company for my home health care business and nursing registry is this a good idea. I’m in US 🇺🇸
Hi Maebeeee The same principles apply whether you are in the US or in South Africa. Some of the terminology may differ, but the concepts remain the same. I would start with registering a trading company and only if (or when) you have multiple businesses should you consider registering a holding company. Remember the company holding structure is not cast in stone, as you can always add a holding company to the group company structure at a later stage. I hope this helps and good luck with your health care business.
@@swiftreg Thank you I appreciate your advice.
Hi. I have recently opened a PTY LTD. My question is: How do I change it to a holding company? Thank you.
By taking up shares in another company. Your company will then become the holding company and the other company (the one whose shares your company owns) will be the subsidiary company. In short, you do not have to make any changes to your company.
Thank you so much. It makes sense to me now. 😌@@swiftreg
Greetings, How does one register a company under a Holdings company?
All companies are registered in the same way. The only difference (between a holding and a trading company) is the shareholding. CIPC does not ask for the shareholding during the registration, therefore you can transfer the shares to the holding company at any time even 6 months after the trading company was registered. Therefore the answer is by transferring the shares. I hope this answers your question.
@@swiftreg Okay, it's a bit confusing, but according to my understanding with your reply it means I have to register a trading company and state that the shareholders are the under the holdings company after registration.
Yes, that is correct. If you would like us to handle the process for you we issue the share certificates at the same time as the company is registered. The trading company will have the holding company as the shareholder aka (juristic shareholder) and you will be the shareholder of the holding company.
Thank You Very Much For The Valuable Explanation Sir...But I have one Doubt ⤵
If I Take A Share In a Holding Company, Would I Really Get A Share Of Other Companies Which Are Held By The Holding Company.....I Mean Will I Get Those Shares Seen In My Portfolio, As I'm New To Investing, Everything Seems A Bit Complicated...Help Would Be Utterly Appreciated, Love From India ◽
Hi there, you indirectly own a small portion of the shares in the various subsidiary companies. You will not receive shares certificates in these subsidiaries; this is because your ownership is represented by the holding company. I hope this answers your question.
@@swiftreg Thank you Sir, May Your Channel Grow As Quickly As It Can In CHRIST's Name!!
Is there an email adress I can contact? I want to register a business but got a few questions. Thanks!
Hi Lara, thank you for your enquiry. You can contact the office on 021-5954433 or info@swiftreg.co.za and one of our consultants will gladly assist you.
Can a subsidiary company be subject to more than 1 holding company ?
Hi Megan Yes, absolutely there is no limitation on the number of shareholders meaning more than one company (as well as individuals) can own the shares in the trading company.
@@swiftreg thank you for your response !
Is there a particular law that regulates that there could be multiple holding companies? And what would the effect be on control?
Hi Megan, no there is not such a law. The holding companies is effectively just a shareholder and you can have many shareholders.
Can you just tell us the legal laws of a parent company sir?
Hi Sai, Parent companies also known as holding companies are exactly the same as normal trading companies. There is no difference in terms of the laws, regulations, tax rates or even the way they are registered. The fundamental difference is in the shareholding and if they actively trade or not.
Basically allows the business to get away without paying the debt they owe if things go wrong by manipulating the rules. They then liquidate the bankrupt company, keep their assets and set a new one up!
Hi Luke, you are correct. This principle is called limited liability protection and applies to all types of legal entities. The banks and other lenders are aware of this concept and therefore ask for collateral and personal surety before they loan out any money.
@SwiftReg Company Registration Doesn't that also mean that if the company goes bankrupt in the process of fulfilling orders for consumers for example, then essentially they will have no assets in the subsidiary and hence the consumer will either lose their money when the company liquidates, or the bank will pay their losses because the consumer paid with credit card (in the UK section 75 protection), or sometimes a debit card reversal. Sadly allows businesses to get away with duping their customers if they fail despite having assets in their parent company which are essentially used exclusively for the subsidiary anyway.
So confusing
Hi Michael, yes it can be a tricky topic to get you head around. I have tried to make it as simple as possible. Please let me know which aspects you still find confusing.
Why is this guy focusing on South Africa? 😂
Hi there, yes you are correct as we are based in South Africa and mainly deal SA government compliance, however most of the topics such as this video are also applicable to a global audience.
Great content