Ultimate Holding Companies

The Corporations Act 2001 requires a company’s ultimate holding company to be disclosed on ASIC records; however, most accountants and advisers are not 100% sure about what a holding company is.

It is a matter of public interest and record that a company advises ASIC of its ultimate holding company if it has one, so persons dealing with a company can know where the ‘control’ ultimately lies. Is it always necessary to have an ultimate holding company? Short answer is no.

Control does not always mean ownership or shareholding, but can be exercised by other means. Therefore, the meaning of ‘ultimate holding company’ focuses on the ultimate controller of a company. An ultimate holding company must be the holding company of another, and must not be a subsidiary of any other company.

This means that one company can control another company by, for example, exercising voting powers or controlling the composition of the company’s board of directors. Control may be exerted by interposed companies and therefore does not rely on a ‘holding company’ directly holding shares in the company.

The simplest examples of these concepts are:

1. If all of company A’s shares are held beneficially by individuals, it is unlikely that the company will have an ultimate holding company.
2. If all of company A’s shares are held by company B whose shares are all held beneficially by individuals, it is likely that company B will be company A’s ultimate holding company.
3. If all of company A’s shares are held by company B whose shares are all held by company C whose shares are all held beneficially by individuals, it is likely that company C will be company A’s ultimate holding company.

You should contact Acis if you are unsure whether your company has an ultimate holding company or if you need clarification of the meanings of ‘ultimate holding company’, ‘holding company’ or ‘subsidiary’.