Section 1159 of the Companies Act 2006 (CA 2006) sets out the meaning of ‘Subsidiary’, stating that:
‘A Company is a ‘subsidiary’ of another company, its ‘Holding company’, if that other company:
a) holds a majority of the voting rights in it, or
b) is a member of it and has the right to appoint or remove a majority of its Board of directors, or
c) is a member of it and controls alone, pursuant to an agreement with other members, a majority of the voting rights in it,
or if it is a subsidiary of a company that is itself
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There are two suggested definitions for the term 'subsidiary', as commonly used in agreements. CA 2006, s 1159 provides that a company is a holding company of another company (its subsidiary) if it satisfies one of three tests, two of which require it to be a member of the other company (as well as to possess certain rights, which go to its voting powers). Membership of a company is a question of fact and the court has found that if a company (company A) has transferred shares in another company (company B) to a lender in connection with the taking of security and the name of that lender or the lender’s nominee has been entered in the register of members, then company A is not a member of company B in respect of those shares: see Enviroco Ltd v Farstad Supply A/S.
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