Ultimate Holding Company

Corporate Law Economic Reform 7 a.k.a. CLERP 7 introduced changes to how Australian companies are managed and regulated from 1 July 2003.

One interesting aspect is the requirment to report the Ultimate Holding Company of a Company. Does that mean that private companies whose shares are owned by corporate trustees (as trustee for a trust) have an ultimate holding company?

It took some digging but Division 6 (specifically s48 of the Corporations Act 2001 seems to say that fiduciary capacities are ignored. So for now, none of the companies on whose boards I sit are subsidiaries. I think I like it that way.

But by virtue of the definition of related body corporate they are all related entities. Actually the definition makes my brothers’-in-law companies related entities even though we are in different industries.

It might be time for Six Degrees of Australian Boardrooms. It’s a bit like Six Degrees of Kevin Bacon but I suspect related entity rules would see me and say Janet Holmes a Court being no more than three degrees away.

Try it, you may like it.

Update 1 June 2006: If this post was useful, please leave a comment. My logs show this is one of the most popular posts on the site, it would be nice to get a “hi” from some of you.

9 responses to “Ultimate Holding Company”

  1. So if I am starting my own company, do i want to register it is an ultimate holding ompany? What legalaties does this mean for me?

    Hi, by the way 🙂

  2. Hi Simon

    Thanks for dropping by. In the registration documents and in your annual review for ASIC you’ll be asked to identify the ultimate holding company of your company, if any. If this is your first company it does not have an ultimate holding company.

  3. Hi! :^)

    We have a Family Trust and a company that is trustee of the Trust, so now that we are starting a second company, do I list the Trust as the ultimate holding company?

  4. Hi Francesca,
    Remember that a Trust is not a “Legal” person so it can’t be the ultimate holding company. If Company A is trustee of the Trust and if the shareholder of company B is “the Trust”, it is actually Company A as trustee for the Trust that is the ultimate holding company. But as you cannot register a holding as trustee for a Trust you can just put Company A.
    Sometimes you can register a shareholding as Company A to indicate the Trustee company is not acting on its own account.
    Disclaimer: I am not a lawyer and this is not legal or investment advice. It reflects my own research and opinions. If you need to rely on this you should consult a suitably qualified professional advisor.

  5. I got here doing some digging on Reforms in the Australian economics. Although it’s interesting how things evolved over time in different countries, I look forward to globalization putting its mark on economics as well. Then it will be really exciting to watch things in action… I already envy my kids.

  6. Hi,
    If a company A is 50% owned by company a company B which is itself 51.1% by company C, would it be right to say that company C is the ultimate holding company A?

  7. Hi M.Iqbal

    This is not legal advice…

    Company C is the Ultimate Holding Company (UHC) of Company B.

    The situation with company A is trickier. The answer is “it depends”.

    If B owned 50% plus one share of A then C would be the UHC.

    An ultimate holding company cannot be a subsidiary of another company.

    Company B/C can exercise control of company A if it can

    appoint A’s Board of Directors;
    has more than half the voting power at a general meeting; or
    owns more than half the issued capital of A.

    So at 50% ownership it is a related company. If B or C cannot appoint the board, or carry a general vote then A does not have an ultimate holding company.

  8. @Thinking sorry I missed replying to your comment. I initially wanted to consider my reply and then I forgot about it.

    I don’t think Economics put it’s mark on globalization rather than the other way around. When I did my undergraduate work we were talking about the mainly theoretical impact Asia and the Eastern block would have on manufacturing and service provision in the First World.

    The definitions we used at the time were interesting: First World, Second World, Third World.

    Either way I too envy my kids, or at least the opportunities they will have. But I think that’s normal for forward looking optimistic people.

  9. hi, suppose I want to apply for a travel insurance under Company A. I have couple of other business named B & C which are having their own ACN & ABN. By having Company A as the ultimate holding company for B & C, will the insurance company cover the insurance for B & C as well when I take out the insurance for Company A. Thanks

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