What is a subsidiary agreement?
If you buy a company and then control it, then the second company is the subsidiary. It is a normal thing we see in the business. For example, Facebook that bought Whatsapp and Instagram. Now, these companies are the subsidiary. And then, if you are looking for certain agreements related to this, you might need to learn about the subsidiary agreement.
When there is a subsidiary company, then there will be a parent company which can be a sole or several owners. If a company buys a whole company, then it is called “wholly-owned subsidiary”.
Then what is the difference between holding and parent company? In terms of operation, the holding company cannot operate the business on its own. This should be based on the stock share and the assets. Meanwhile, the parent company is a company that has another business. This has its operation while the subsidiary company is bringing things related to the market. For example, the parent company is focusing on the service or products, while the subsidiary company is focusing on the assets management with a purpose to keep its liability.
Why Does A Company Form A Subsidiary?
In every business, especially real estate, the subsidiary companies are widespread — the purpose of having subsidiaries to protect the assets from liabilities. For example, if you have three subsidiaries, A, B and C, and then the A company is being sued, then the B and C will not be affected.
Then how does a company make a subsidiary?
The subsidiary company is made by registering the company that is operating. For example, you own the A company and want to make B company as your subsidiary to manage your properties. And then the B company can register with the stated which it is owned by A company whole-fully owned.
Talking about buying a company for a subsidiary, we have the subsidiary agreement template and subsidiary loan agreement. Probably you will need it to get more ideas and knowing how to draft it.
Steps In Creating A Subsidiary Agreement
- Make A Plan – First, you can start making a plan with the initial tasks in it. By doing this, you will not miss out important details.
- Board meeting – This is crucial because it is about the company’s future. Call the meeting board and cast a vote whether a company will buy the subsidiary or not. And then record it in the meeting minutes agreement. Draft it in the resolution and make sure it signed by the chairman.
- Choose the state – The next is choosing the country and state the business status and then prepare any documentation required.
- Capitalise the new company – After you capitalise the company, you can transfer your assets to the subsidiary company.
Next, it is time to consult your document with the attorney or lawyer. They will help you outline practical clauses and terms as well as preparing other materials you need. You can learn the structure from our template and practice drafting it properly.