Wholly Owned Subsidiary

What Does Wholly Owned Subsidiary Mean?

A subsidiary whose parent company owns 100% of its common stock.

Investopedia explains Wholly Owned Subsidiary

In other words, the parent company owns the company outright and there are no minority
owners
A wholly-owned subsidiary is a company whose stock is entirely owned by another
company. The owner of a wholly-owned subsidiary is known as the parent company or
holding company. Because the parent company owns all of the stock of the wholly-
owned subsidiary, the parent company can control all of its activities. Moreover, under
GAAP, all of the financial transactions of a wholly-owned subsidiary are consolidated
with those of the parent company. Thus, all of the activities of the wholly-owned
subsidiary are part and parcel of the parent company for both operating and reporting
purposes. Why, then, does a company establish a wholly-owned subsidiary? A wholly-
owned subsidiary is a separate entity for legal purposes. Thus the laws of the state or
country in which the wholly-owned subsidiary is incorporated apply to the subsidiary, but
not the parent company.

Wholly owned subsidiary

A subsidiary whose parent company owns virtually 100% of its common stock.

Copyright © 2004, Campbell R. Harvey. All Rights Reserved.

wholly owned subsidiary

A company that is totally owned by another company. For example, American Airlines is a
wholly owned subsidiary of AMR Corp. A wholly owned subsidiary may have publicly
traded preferred stock and debt, but all of its common stock is owned by a parent company
and is unavailable for purchase.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by
David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by
Houghton Mifflin Company. All rights reserved.
Wholly Owned Subsidiary
A company that, while theoretically publicly-traded, has all of its common stock owned
by a single company. Some wholly owned subsidiaries belong to the same industry as the
parent company, while others do not, and are part of a diversification effort on the part of
the parent company. A wholly owned subsidiary's board of directors is directly appointed
by the parent company, and is ultimately responsible to the shareholders of the parent
company. Some wholly owned subsidiaries were once part of the parent company but
were spun off, while others were smaller companies bought outright by their parent
companies. See also: Holding company.
When a subsidiary is considered to be wholly owned, this indicates that all of the
outstanding common stock that is currently issued by the company is in the hands of a
single holding company. Essentially, a wholly-owned subsidiary is a business that is
completely owned by another entity. The subsidiary continues to operate with the
permission of the holding company, either with or without direct input from the
controlling entity.

There are several reasons why a company would choose to operate a wholly owned
subsidiary, rather than simply absorb the acquired company into the central corporate
operation. One of the most common reasons is a matter of location. The wholly-owned
subsidiary may physically reside in a different country from the holding company. When
this is the case, there may be compelling financial and regulatory factors that make it
much more financially sound to allow the company to continue more or less
autonomously.

Another common reason for the operating the wholly-owned subsidiary separately from
the owner company could be name value. Often, a well-known and respected corporation
is acquired by another entity that has no name recognition in that particular market.
Rather than spend huge amounts of time and resources to create a reputation, the holding
company will simply decide to remain in the background. This allows the wholly-owned
subsidiary to continue to enjoy the current name recognition and market share, while
being able to work with the resources of the parent company to find ways to enhance that
reputation.