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Difficulty: EasyBusiness Combinations: Mergers, Acquisitions, Holding, and Subsidiary Companies

When one company acquires more than fifty percent of the voting shares in another firm to gain controlling interest while allowing the latter to retain its separate legal identity, the controlling firm is referred to as a

  1. holding companyAnswer
  2. B
    limited partner
  3. C
    public enterprise
  4. D
    trade association

Answer

Holding company
A holding company controls another business by securing more than 50% of its voting equity. The company being controlled remains a distinct legal entity known as a subsidiary.

Step-by-Step Solution

1
Identify the nature of corporate equity ownership described in the prompt.
The acquiring firm holds a majority interest (over 50%) of the voting equity.
Majority shareholding grants administrative and decision-making control.
2
Match the ownership arrangement to its correct commercial definition.
A firm exercising controlling interest via majority shareholding while keeping the acquired firm legally independent is a holding company.
This corresponds directly to the legal definition of a parent or holding company.

Key Concept

Holding and Subsidiary Company Structure
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Topics

Business Combinations: Mergers, Acquisitions, Holding, and Subsidiary Companies

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