Parent Company and Subsidiary: How a Group Works

A parent company and one or more subsidiaries form a group when the parent company has controlling influence. This influence can stem from shares, voting rights, or agreements.

What is a Parent Company?

The parent company controls another business. It can be a pure holding company or itself conduct operational business. Control is not just about the name or shared brand between companies.

What is a Subsidiary?

A subsidiary is the legal entity controlled by the parent company. It has its own organisation number (organisasjonsnummer), its own agreements, and, as a general rule, its own liability. A subsidiary can, in turn, own other subsidiaries.

Associated companies and minority investments are not necessarily subsidiaries. Shareholding and actual control must be assessed.

What is Consolidated Financial Statements?

Consolidated financial statements combine the accounts of the parent and subsidiary and eliminate internal transactions. The purpose is to present the group as a single economic unit. Small enterprises and certain other situations may be subject to exemptions, so not all groups have publicly available consolidated financial statements.

Why Must Companies Be Assessed Separately?

A well-known group name is no guarantee that the parent company will cover the subsidiary's debts. Before entering an agreement, you should check the legal contracting party, signing authority, financial statements, and any parent company guarantees. Also look for loans, receivables, and other inter-company dependencies.

Group Structure on Proffi

Proffi should display legal entities in an interactive ownership tree. Each connection must state the ownership percentage, direct or indirect relationship, source, and update date. Group figures must never be presented as company figures without clear labelling.