Difference between Subsidiary company, Sister concern, Associated company,Joint Venture,Conglomerate and Group of companies

A Subsidiary company can be described as an enterprise, the management of which is controlled by a parent company. The parent company is one which has one or more subsidiaries. In all cases the parent company will hold more than half of the voting power of the subsidiary company and controls financial and operating policy decisions of the subsidiary.  If the parent company holds 100% of controlling interest in a subsidiary company then that subsidiary is called wholly owned subsidiary of the parent company. For example, the SBM, SBBJ, SBH, SBP, SBT, are the subsidiary banks of State Bank of India. SBI has the controlling interest from 75.07 percent to 100 percent in those subsidiary banks. State Bank of India (Canada) [SBICAN] is also a foreign subsidiary of SBI.

Sister Concerns are two or more separate enterprises owned by the same owners/Corporates. The activities of these sister concerns do not have any connection with the operations of each other’s business. Thus, except for their common owners, legally or financially they are not related to each other.

An associate company is an enterprise partly owned by another company or group of companies known as the parent company. Unlike parent of the subsidiary, the parent company of the associate companies does not have controlling power on its associates but they have the significant influence on the business activities of such associate (significant influence means the power to participate in the financial and operating policy decisions). It is very common that we find both the associate and its parent company have the certain numbers of common Partners or promoters/Directors. The associate company’s financial positions do not reflect in the consolidated financial statements of the parent company and same has no effect on the balance sheet, profit, and loss or cash flow of parent company.

The joint venture is a contractual arrangement whereby two or more parties have joint investments in a business undertaking.   The Joint investors in the economic activities of such undertaking will have the joint control over the operation of the project and will have the rights to its net assets as per the contractual arrangement.

Group of companies refers to the group of the parent company and all its subsidiaries. The terms ‘Group of companies’ and ‘Conglomerates’ are used synonymously for companies sharing of common ownership for the purpose of diversification of their business activities.