Parent company (Muttergesellschaft)
Also: Muttergesellschaft, Tochtergesellschaft, subsidiary, parent, daughter company
In short
A parent company holds shares in another company, the subsidiary, and can control it in this way. Both remain legally independent and are each liable for their own debts.
Parent company (Muttergesellschaft) explained
The typical case is the holding: the parent GmbH or parent UG holds the shares, and the subsidiary runs the operating business. Legally, the subsidiary belongs to the parent, and the parent's shareholders only control it indirectly. One subsidiary is enough, and more can be added at any time, for example for a second line of business. In the case of a majority shareholding, the Stock Corporation Act presumes that the subsidiary is dependent and forms a group with the parent (Sec. 17 (2), Sec. 18 (1) sentence 3 AktG). For tax purposes, 95% of the subsidiary's dividends remain exempt from corporation tax at the parent, provided it holds at least 10% at the start of the calendar year (Sec. 8b (1), (4) and (5) KStG). Contracts between parent and subsidiary should be written, clear and at arm's length.
