A Subsidiary Post

Allen Matkins
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Not too long ago, I wrote about the Securities and Exchange Commission’s confusing classification of subsidiaries.  See The Case Of The Wholly Owned, But Not Totally Held, Subsidiary That May Or May Not Be 100% Owned.  Since this blog is concerned primarily with California corporate and securities laws, I would be remiss in not adding a mention of the meaning of “subsidiary” under the General Corporation Law:

“subsidiary” of a specified corporation means a corporation shares of which possessing more than 50 percent of the voting power are owned directly or indirectly through one or more subsidiaries by the specified corporation.

Cal. Corp. Code § 189(a).  However, for purposes of Section 703, which denies voting power to shares of a corporation owned by its subsidiary, a “subsidiary” of a specified corporation means a corporation shares of which possessing more than 25% of the voting power are owned directly or indirectly through one or more subsidiaries as above by the specified corporation.  Cal. Corp. Code § 189(b).

Etymologically, the word “subsidiary” is derived from the Latin verb “sedere”, meaning to sit, and the Latin prefix “sub”, meaning beneath or under.  Thus a subsidiary literally is something that sits below something else.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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