Starting a HOLDINGS Company

[Elijah]

Hi All

Need some advice please. How does one go about forming a "HOLDINGS" Company, that is to say. several companies with one of them as the holdings Company.

Thanking you in advance.

[BusFact]

Register a new company with CIPC.

The new company buys the shares in the subsidary companies.

You have a holding company.

[SSS100]

Yes, thats the process per above.
But, be careful...you need to "declare" your a registering a holding company as a holding company does not trade but it own shares in other companies.

[Petrichor]

What is the benefit of regsitering a holdings company? Is there any benefit if shareholding in the child companies are all 100%?

[BusFact]

No obvious benefit. Only thing is if you want to change shareholdings in the future, you only need to change the holding company and there is no need to do several transactions for each subsidary company.

[Elijah]

Thanks for your contribution, BusFact and SSS100.

[sbongak]

Does this mean that each subsidiary needs to be registered?
Say for example i wanted to start ABC Cleaners, ABC Contractors, ABC Security Services, ABC Designs all belonging to Holding company ABC Holdings. What's the process here?

[Dave A]

Reminder: A holding company can only "trade" in the ownership of other registered companies.
This means the short answer to

Does this mean that each subsidiary needs to be registered?

is YES.

You should also bear in mind that each activity of the company needs to fall within its declared scope of activities.

[BusFact]

You should also bear in mind that each activity of the company needs to fall within its declared scope of activities.

How necessary is this really? Usually we have to fill in our main source of income when doing tax returns for example. But surely there is no requirement to only work in a specific industry?

For example: If we are currently making plastic hats for the entertainment industry, are we really forbidden from now trading in steel hats for the mining industry?

[BusFact]

There are different ways of doing this:

1) You have one company - a pty ltd which you register at CIPC. Within this company you have "divisions". These are not different companies, but merely informal sections you have divided up - a grouping of products if you will. In much the same way that a Pick n Pay has a deli section, a bakery section, a frozen foods section, etc. You can design different invoices and product literature for each division by using branding. Eg: The invoice details and bank account are in the name of ABC Holdings (the name of the company reg at CIPC), but you stick a bright heading and logo at the top of the page which shows the division's brand name. To the layman it looks like they are dealing with ABC Cleaners, but accountants and businessmen will still see that the actual company is ABC Holdings. This is not a problem, and is necessary so that someone knows who they are contracting with from a legal perspective. This is the cheapest and simplest way, but means that the same shareholders own all parts of the company and if one part fails, it will affect all the others as they are really the same entity.

2) Register each of the sections as a company. ABC Holdings will then be the total or part shareholder in all of the others (subsidiaries). This is more expensive and more admin, but allows for different owners in each section and partly protects the rest of the companies if one fails.

3) Similar to (1), but each section users the term "trading as" (T/A). It used to be quite popular but the Consumer Protection Act and difficulties registering trading names with CIPC has made it less so recently. The impractical part is that getting someone to invoice you as "ABC Holdings (Pty) Ltd T/A ABC Cleaners" can become pedantic and not all accounting packages have enough space to fit the name in properly.