The holding company or “parent company” is a company whose main purpose is to manage investments.
Thus a parent company holds interests in one or more so-called subsidiary companies. And according to the provisions of the Uniform Act, a company is the parent company of another company when it owns more than half of the capital in the second company. The second company being the subsidiary of the first.
In practice there are two types of holding company:
· The so-called “passive” holding company if its corporate purpose is based solely on the holding and management of investments.
· The holding company becomes “active” since it carries out a so-called “operational” activity by providing services for its subsidiary.
Several reasons can motivate the creation of a holding company, here are several examples:
- The purchase of a company;
- Tax or asset optimization;
- The creation of one or more subsidiaries;
- Geographic expansion.
- The holding company presents financial, legal, tax and operational advantages.
1- Financial advantages: The creation of a holding company aims to set up a company holding shares in other companies which then become its subsidiaries. The holding company (or parent company), as a legal entity, then replaces a natural person and can take out a loan more easily.
The manager can also simply invest in the parent company to take control of the subsidiaries. To do this, it only needs to have a majority in the holding company.
Finally, the holding company can bring together all the support functions of the subsidiaries. This pooling of services is then a source of savings for all parties.
2- Legal advantages: Within the framework of a holding company, loans are made in the name of the latter so that it protects the personal assets of the borrower.
As part of a business transfer, the manager can appoint a successor without entrusting him with the majority of the company's capital because the mere fact of being a majority in the parent company is enough to have control over the subsidiary.
Finally, the creation of a holding company gives the possibility of carrying out an equal sharing of capital between several successors while allowing one or more of them to have a majority in the holding company and manage the entire structure.
3- Tax advantages: The operation of the company group allows you to benefit from a total or partial exemption according to the mother-daughter regime or the tax integration regime.
The parent-daughter plan allows you to benefit from a tax reduction on dividends received from daughter companies. This operation will be exempt up to 95%.
For the application of the mother-daughter regime certain conditions must be met:
– Companies must be subject to IS
– The parent company must have its head office in Senegal
– The shares or shares held by the parent company must be at least equal to 10% of the share capital of the subsidiary
Each company declares its taxable amount and is liable for corporate tax with the exception of exempt income from the parent subsidiary regime.
4- Operational advantages: The concept of a holding company obviously aims to simplify the management and orientations of the different groups by ensuring a certain coherence. Thus, it centralizes all (most of the time) management or logistics functions within a single major structure: the parent company.
In this way, it often allows economies of scale, better transmission of information and better cohesion.
