The benefits of setting up a holding company are fairly impressive, from tax benefits and financial gain of successful subsidiaries to an overall higher level of management control, so it’s unsurprising that the prospect of owning a holding company in the UK is an attractive one. But whether you’re fairly new to the scene or a business extraordinaire, setting up a holding company might not be quite as carefree as it might appear (to some anyway). So here are a few things to think about when embarking on your brand new holding company adventure.
What Does A Holding Company Look Like?
When setting up a holding company, you’ll find the structure is not entirely different to that of a standard business, with a board of directors sitting at the top of the pile, allocating a CEO to oversee the overall operation. Within the holding company will lie it’s subsidiaries which will be partly or wholly owned by the holding company itself. A successful holding company takes the pleasure of owning,managing and taking financial gain from some brilliant companies without the added hassle of producing, delivering or marketing anything. Sounds like a good deal.
An Example of A Holding Company
A good example of an incredibly successful holding company is Johnson & Johnson
, household pharmaceutical name and seemingly a company quite clearly putting products on the market. But Johnson & Johnson don’t actually do very much in the way of production. The business is a holding company in the sense that they have (at least part) ownership over 265 separate businesses
. But, as is characteristic of a holding company, each individual company is essentially a stand-alone, complete with their own staff, bank accounts and ways of going about their day.
How To Set Up A Holding Company
1. Business Plan
First things first, conduct as thorough research as possible, once you’ve honed down on the industry you want to focus on (hopefully it’s one you have personal experience and knowledge of), take a really close look at the market to spot any gaps for potential consolidation. May sound simple but without a solid business plan detailing everything from acquisition to the number of additional staff needed, your efforts of setting up a holding company may fall flat.
It’s also important to understand the competition in order to better position yourself in the market as a holding company.One study into holding company competition
suggests that being more client-centric holding company
could be the key to success so it certainly worth having a think about how to position yourself.
In order to classify as a holding company (in the UK anyway) you must own over 50% of the share capital in the subsidiaries you take on. One of the easiest ways to instigate the process is to set up a new holding company with enough financial input to go forth and take on a subsidiary or two. There are other possible routes to setting up a holding company
such as buying a company that has already been created for purpose but not yet carried out any of the intended activities to benefit, or transferring shares of subsidiaries that were held by individual stakeholders in the past. However these options can be a little more testing.
When it comes to qualifying for ‘holding company’ status, the Companies Act 2006
is your go-to source of information and outlined the following requirements:
- The holding company must hold the majority (50% or over) of the voting rights in the subsidiary.
- The holding company must be a member of the subsidiary with the power to right to both remove and appoint the majority of the board of directors.
- There should be an agreement with other shareholders that the holding company and the holding company alone, controls the overall majority of voting rights within the subsidiary.
Once you’ve determined that you qualify, setting up a holding company in the UK is not all that different from setting up any other company limited by shares. The GOV.UK
website is an incredibly useful source of information when it comes to setting up your holding company properly, especially if you want a better understanding of shares. One of the first things needed is a ‘statement of capital’ which is essentially a list of the total number of shares, how much they are worth (‘share capital’) and who owns them. You’ll also need to provide information known as ‘prescribed particulars’ which is essentially an overview of the rights of each of the shareholders. This can include any dividends they are entitled to, whether they have the power to exchange shares for money and any voting rights within the subsidiary this might give them.
Shares aside, in order to succeed in your quest of setting up a holding company in the UK there are a number of documents you’ll need to produce in order to prove your worthiness as a holding company. These include full address and name of company, information on the director and memorandum
. For a full list of requirements please see our blog
on how to set up a holding company.
There is a plethora of information on the benefits of setting up a holding company in the UK and the tax advantages that come with it, for more specific information on tax treaties please the GOV.UK website
. If you’re thinking about how to set up a holding company but not entirely confident in your knowledge on the subject, the helpful highly experienced team at PNG Formations are here to provide specialist guidance where its needed. If you’re ready to set up a holding company and have all of the information required
to do so, then our team will send your application off to Companies House
, taking the pressure off you and your team. Maybe you’re looking to get your new business up and running with as little stress as possible; purchasing one of our company formation packages
will guide you through the process of setting up a new business and could be just what you’re looking for. Contact the team
today for more information on how to get your holding company dream off the ground.