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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.
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.
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.
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?
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.
BusFact. Thank you for the informative response.
Seems like the right route to take is registering each entity, although it may be time consuming with all the documentation and administration.
So if I wanted to tender with government, I'd have to register each company seperately on the databases?
That sounds like a lot of hassle. How big is each of these companies? The simplest solution is still to just have one company. Why is it that you want to separate each company/section - the answer to this will indicate which solution is best for you.
Thanks BusFact
I could think of a number of scenarios.
1.Say, in future, for example you want to offer shares from one your division, ABC Contractors which is a subsidiary of ABC Holdings offers share for partnership with someone with experience or vast knowledge and network in construction. But you don't want them to have any association with ABC Cleaners or ABC IT Solutions.
2. Protection of your other business, should there be a legal dispute
It's quite a lot of administration. If I decide to use just one company for everything, won't it affect records? Cause then it'll be like you forming a new company e.g. ABC Contractors, should I decide to only register that company independently when it's a large company
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?
Thank you for this information, I also register a company but I am still deciding on a name, my aim is to have a holding company and later the subsidiaries trading under it. Thus from what I deduce from the discusion above is that I need to declare it with CIPRO?
A "holding" company is simply a company, no different from any other, that holds shares in other companies. In fact, there isn't really such a thing as a "holding" company.
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