Holding company registration, its advantages and disadvantages

Advantages and disadvantages of registering a Holding company

What are the benefits of registering a holding or parent company? How is the registration of the holding company? Conditions for converting a joint-stock company into an investment parent company, if you are active in the business market, you must have heard the name of the holding company. These days the name of holding companies is heard more than ever before. And on top of that, we are going to share some information regarding the registration of the holding company, and we suggest that you follow this article until the end.

What is a holding company (parent)?

Before we talk about the registration of the holding company (parent), it is necessary to talk about the holding company so that you have complete information about these companies. Holding company is also referred to as parent company, main company, owner company, controlling company and shareholder company. There are many differences between holding companies and other companies. In normal companies, the topic of activity is clear and economic activity is carried out according to that topic, but in holding companies, this topic is slightly different, for this reason, we explain it with a specific example.

For example, imagine a company that manufactures health and cosmetic products. In a normal company, specific and determined products are produced and sold under a specific name (the name of the company, or the name of the brand they have chosen). While the activity of a holding company is different from this issue. In a holding company, a specific product or service is not provided, that is, it is not provided in the way we usually expect it. Instead, we see that in a holding company, the position will be provided for the activities of other companies, that is, in such a way that a holding company provides the capital for the activities of another company.

The activity of the holding company is that they buy the shares of a certain company and in this way they can have voting rights in the same company. In general, it should be noted that a holding company manages several subsidiary companies, and this management is not an easy task.

For example, consider a company such as Al-Fajr International Business Group. It is one of the types of holding company that has several other companies operating in different fields under its portfolio, in a way, it can be said that this company has several other companies under its control and leadership. Of course, this control has different forms, which we will examine further.

Registering a holding company requires having a high and sufficient knowledge in the field of holding. Therefore, in the following, we are going to express some things about the characteristics of the holding company. Our suggestion is that you do not miss the continuation of the content and stay with us until the end of this article, so that you can get complete information in this regard. In general, you should note that holding companies are divided into two categories, which we will explain each of them below.

In some holding companies, we see that business and commercial activities are carried out like other ordinary companies. These activities can have different forms according to the field of activity and the type of activity, but this is not the only work that this holding company does. Note that the main and important difference between a holding company and a normal company is that the holding company also owns the shares of another company. For this reason, in such a case, the holding company, in addition to having its own business and commercial activities, has bought the shares of another company.

In such a case, we say that the holding company operates as a controller, that is, it will control the activities of another company whose shares it bought. This matter is of great importance and you should pay special attention to it. In the following, we will state other things related to this company. On the other hand, we see a different type of holding company that has its own characteristics. In this case, instead of focusing on business and commercial activities, the shareholders of the holding place all their shares and focus on buying shares of other companies and are no longer active in the market.

In this case, the holding company will be known as a holding company, that is, this holding company has many companies as its sub-group and the activity it does. In fact, it is related to the business activity of these subsidiary companies. Naturally, in this case, the holding company must have a large amount of capital.

Types of parent companies

It is almost impossible to register a holding company without knowing about the types of this company. Before you take any action, you should get complete information about this company, this information will allow you to choose the type of holding company correctly, and that is why it is very important.
We see that all companies under the holding group only produce a specific product. For example, a certain holding company only produces cosmetics and health products.
Among the other types of holdings are those known as supply chains. What is the reason for the name of the chain?! This is because the companies have different activities in these holdings, but all of them are working to achieve a specific goal. For example, companies that operate in the field of oil extraction and sale are usually part of a supply chain holding company, which means that each company meets the needs of another company.
Another example of holding is a combination of the above mentioned items. As it is clear from the name of this company, various companies are working in it with various products and activities.

According to the information mentioned above, it is easy to understand why we emphasized in the above information, before proceeding to register the holding company, you must first know that you intend to register the company. And for this reason, we presented these materials for the audience’s better knowledge.

Ways to control parent investment companies

Another thing that you should be fully aware of before establishing a holding company is how a holding company can control its subsidiaries. It should be noted that such issues must be specified precisely before the holding company, so that you do not face problems later.

Control through limited ownership

In this case, a percentage of the shares of the subsidiary companies is named after the parent company. And for this reason, the parent company can have voting rights in the decisions of the subsidiary company.

Control through specifying the board members of the subsidiary company

In this case, the parent company or holding company has the authority to determine the board members of the subsidiary company. In such cases, since the selected members are employed by the holding company, that is, the holding company’s wishes will be implemented indirectly.

Control by specifying the budget of the subsidiary companies

In other cases, we see that the holding company controls those companies by determining the budget it intends for its subsidiary companies.

Consolidated Financial Statements

In this case, there are different ways to control the subsidiary companies that the holding company chooses and implements according to the specific conditions.

Be aware that controlling a holding company in any form, if done correctly, will result in positive results for the individual. For this reason, we suggest you to look for the right way to do this before registering the holding company, so that you don’t run into problems in the future.

How to create a holding company?

Another question that arises regarding the registration of a holding company is how to become the owner of a holding company. Keep in mind that holding is not as difficult as you imagine. In fact, you can easily have a successful holding if you get help from expert advice at the very beginning.

To begin with, we suggest that you clearly define your goals. Setting a goal makes you know exactly what to do and what to strive for, this makes you act purposefully and will have many positive effects for you.
In the second step, you have to provide the initial capital you need. It should be noted that in order to register a holding company, you will need a minimum capital of 50 billion Rials, this is the reason why you will not have problems controlling and managing other companies under your portfolio.
In order to register a holding company, pay attention to another issue, that you must have a joint stock company as a subsidiary at the very start. You will need a certain amount of capital to register this company. So, be sure of your capital before starting a holding company.
In the next step, you must collect the documents you need to establish the holding company. In the following, we mention these documents for you so that you have detailed information regarding this issue. We suggest you to submit the documents correctly and completely at the very beginning, so that you do not face any problems during the registration process.
After these steps, you should send the documents to the registry office and wait for the relevant experts to check these documents. If there are no problems with it, you will be allowed to register the holding and you can start your economic and commercial activity in specific formats.

Required documents for the registration of the holding company

The letter of authorization you received to register your holding company.
Copy as well as the original of the important identification documents of the main members of the company
Certificate of non-improper background of the main members of the company

Note that since the registration of the holding company requires other licenses, these licenses and documents are different according to each person’s conditions.

Al-Fajr International Business Group is a private holding company that operates in various fields in the form of companies and institutions under its collection, focusing on the African market.