A parent company is a company that owns enough voting stock in another firm to control management and operation by doing and influencing or electing its board of directors. The second company is deemed a subsidiary of the parent company.
The parent company-subsidiary company relationship is defined by Part 1.2, Division 6, Section 46 of the Corporations Act 2001 (Cth), which states:
A body corporate (in this section called the first body ) is a subsidiary of another body corporate if, and only if:(a) the other body: (b) the first body is a subsidiary of a subsidiary of the other body.
The parent company-subsidiary company relationship is defined by Part 1, Section 5, Subsection 1 of the Companies Act, which states:
5. —(1) For the purposes of this Act, a corporation shall, subject to subsection (3), be deemed to be a subsidiary of another corporation, if —(a) that other corporation — (b) the first-mentioned corporation is a subsidiary of any corporation which is that other corporation's subsidiary.
In the United Kingdom, it is generally held that an organisation holding a 'controlling stake' in a company (a holding of over 51% of the stock) is in effect the de facto parent company of the firm, having overriding material influence over the held company's operations, even if no formal full takeover has been enacted. Once a full takeover or purchase is enacted, the held company is seen to have ceased to operate as an independent entity but to have become a tending subsidiary of the purchasing company, which, in turn, becomes the parent company of the subsidiary. (A holding below 50% could be sufficient to give a parent company material influence if they are the largest individual shareholder or if they are placed in control of the running of the operation by non-operational shareholders.)