Financial Holding | Advantages and Assembly

A financial holding company is an interesting structure for uniting shareholders within a central company. Ideal for optimizing cash flow and increasing your company’s borrowing capacity, why create a financial holding company, and most of all, how? Discover the financial holding company, its advantages and its creation formalities.

What is a Financial Holding?

By definition, the role of the holding company is to acquire, hold, and manage the shares and shares within the subsidiaries. A financial holding company is a specialized structure that brings together shareholders wishing to take a stake in a central company. Investments in subsidiaries are chosen for the purpose of increasing the holding company’s dividends and conducting “mother-daughter” financial operations.

Your financial holdings may be:

  • Active, or leader, that is to say, it exercises effective control over its subsidiaries, their offering, various support and advisory services;
  • Passive, this means that you are satisfied to hold shares in your subsidiaries.

What Are the Benefits of a Financial Holding Company?

A holding company is a structure that already offers several advantages, especially in terms of the choice of tax regime. Good news, financial holdings have their strengths too!

increase your borrowing capacity

One way to develop your structure’s borrowing capacity in the short and medium term is by borrowing to buy company securities. This credit is then reimbursed by dividends received. A financial holding company is perfect for this type of operation.

In addition, if there are idle assets within the companies in which the holding takes a stake, it is possible to sell them to accelerate the repayment of the holding’s debt.

Finally, the holding company has the possibility of borrowing funds to its various subsidiaries to redistribute them and thus negotiate more advantageous interest rates than if the subsidiaries each borrowed separately.

Financial transactions within companies are governed by tax regulations. And there’s one unavoidable principle you can’t ignore: the arm’s length principle of pricing. Failure to comply with the latter could result in your financial holding company undergoing recovery.

Benefit from investment opportunities

One of the main interests of a financial holding company is to be able to attract new investors while maintaining control over the distribution of roles for each of:

  • control of the parent company;
  • majority stake in one or more subsidiaries;
  • e.t.c

It is thus possible for a financial holding company to present investment opportunities in various profiles. Financial holding company statutes may provide that new partners may or may not be active in the parent company, a minimum amount of investment, customized roles for each, etc. It is an opportunity for some investors to diversify their portfolio, without having to directly acquire units or shares; Or even delegate to its management.

offer cash agreements

A cash agreement is made between a financial holding company and one or more of its subsidiaries. This agreement makes it possible to centralize the management of your structure’s cash flows. It then allows you to:

  • Taking money from profit-making subsidiaries;
  • redistribute it to subsidiaries that have debt;
  • or for grant of loan to any of its subsidiaries.

Even if there are many advantages to a financial holding company, it also has its limitations. In fact, the tax and legal implications are significant, and can have dire consequences for the parent company and its subsidiaries. That’s why it’s essential to choose the type of holding company you want to form from the outset.

If your interest is purely fiscal, it may be useful to opt for a different arrangement such as a purchase of a company’s securities by a natural person to deduct his or her loan interest.

Forming a holding company is an operation that can be summarized in 3 main steps: the choice of the type of holding company, the drafting of the articles of association, and the formalities of forming a financial holding company.

What type of holding?

There are two types of holding company: civil holding company and commercial holding company. The choice is made according to the activities you want to do. Indeed, commercial activities for civil holding companies are strictly prohibited. In addition, the liabilities of the partners vary according to the type of holding company chosen.

This choice will be crucial for the drafting of the corporate objective of your holding company.

How to Write Articles of Association of a Financial Holding Company?

The drafting of the articles of association of a financial holding company must meet the requirements of the legal form you choose. Thus, in the case of SASU Holding Company, you must comply with Articles L.210-2 and R.210-2 of the Commercial Code.

Again, you should be cautious and careful in drafting the corporate objective of your financial holding company. In fact, it is he who will oversee the activities that you can do within your structure.

It is from the latter that the APE code of your financial holding company will be received.

Depending on the legal form of your holding company, you will need to take several intermediate steps, such as capital deposits, before registering your holding company.

How to register a financial holding company?

A financial holding is registered with the Registry of the Commercial Court on which you will be dependent. To do this, you must compile a file containing at least the following elements:

  • A copy of the dated and signed statutes;
  • Form M0 in duplicate, dated and signed;
  • Certificate of publication in JAL (Journal of Legal Announcement) or SHAL;
  • A copy of the manager’s identity document and the certificate of non-convict.

Not comfortable with business formalities? Don’t have the time or inclination to take care of it? Why not call a legal expert or LegalTech? These service providers provide you with legal and tax assistance and save you valuable time to build an online business.

questions to ask

What is holding?

A holding company is a legal structure composed of a parent company and one or more daughter companies. The holding company holds an interest in each of its subsidiaries.

Why Create a Financial Holding Company?

For a number of reasons: reducing shareholding, entering into cash agreements, and increasing its borrowing capacity while maintaining control of the parent company.

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