Holding Companies: Advantages of a unified structure

Nowadays, holding companies are the umbrella that many family businesses need to reorganize their structure and activity as well as for saving taxes. The advantages they offer are undoubtedly attracting companie’s interests.

For this reason, we would like to discuss the most relevant aspects of this type of company with you.

What are holding companies? 

First of all, a holding company is a commercial entity, either a limited company or a public company, that holds the participations and/or shares of the other companies of the group through a swap of securities transaction. Its primary purpose is to hold shares in external companies.

It is regulated by Article 42 of the Spanish Commercial Code, which states that a group exists when a company has or may have, directly or indirectly, control over one or more other companies. Thus the dominant-dependent relationship is born.

Why set up a holding company?

The holding company setup offers several advantages for companies. This structure provides significant benefits in terms of operational efficiency, strategic flexibility, and legal protection, improving the competitiveness and overall performance of the business conglomerate.

Among these advantages, here are the most important ones:

1. Facilitates decision-making by having a parent company that exercises control over the other companies.
2. In case of losses, profits from other companies are offset.
3. The group of companies pays tax as a single entity.
4. Exemption on dividends distribution is possible under certain tax conditions.
5. They facilitate the succession process so that offsprings can become direct owners of the holding company and indirect owners of the other companies.
6. They can obtain a 95% reduction in the taxable base for Inheritance Tax and be exempt from Wealth Tax.

In the following video, we tell you more about these advantages:

A number of requirements must be met for a holding company to be established. We will tell you about them below.

Requirements for a company to set up a holding company:

1. The purpose and main asset of the company must be the holding of shares or participation in other companies.
2. Choose the correct legal form for the company, such as a public company (SA) or a limited liability company (SRL).
3. It must have economic activity not to be considered a holding company.
4. It must be registered in the commercial register or in the register corresponding to the jurisdiction where it is established.
5. The shares held must represent at least 5% of the share capital of the investee company.
6. The directors or members of the board of directors must be appointed.

Carrying out a corporate restructuring in a company or group of companies is a crucial step to solving or preventing possible future contingencies. At LEIALTA, we have extensive knowledge and experience in this area. In addition, our field experts are prepared to offer you the necessary guidance adapted to each step of this process. Ask us about any doubts you may have!