QS Study

Formation of Holding Company

Peoples of United States of America wanted to resist them and to that end, the Sherman Act was passed as they were operating in the restaurant of trade. Under the Sherman Act, it was stated that “every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce among the several states, or with foreign nations, hereby declared to be illegal.”

Then holding company was formed to protect the monopolistic market. A holding company is an organization which is formed to acquire the controlling amount of shares or stocks of other companies and to controls their policies and operations. So it is seen that holding company is a business combination and is a joint-stock company. A holding company may be formed in two ways. These are-

Formation as a joint stock company: As a joint-stock company holding company can be formed by laws of the country. In Bangladesh Company Act 1994 stated the formation policy of a joint stock company.

Forming combination by purchasing the major portion of the share of other companies: Holding company can be formed by purchasing at least 51% of shares of existing companies. Then the existing companies will be the subsidiary company. The subsidiary company is nominally independent and operates in its own name. But the subsidiary company is and can be managed by the officers of the holding company. The management of a holding company is more oligarchic than the management of other companies because a few persons control a number of companies.