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The holding company is a joint stock company whose activity is limited to owning shares of the capital of other companies operating in the different sectors of the economy, provided that these shares are sufficient to control the subsidiary companies by controlling their boards of directors and determining their major orientations.
Most multinationals (parent companies) manage their international subsidiaries and affiliates in the world through regional holding companies (mostly) that control, manage and coordinate their operations in a given region.
What?
The holding companies are limited to financial aspects and do not perform any agricultural, industrial or service production activity directly (unlike groups). Their capital is fully allocated to contribute to the capital of other productive companies through the purchase of shares or shares in these companies. In contrast, subsidiaries are not legally entitled to own part of the holding company’s capital.
The holding company exercises administrative and financial control over its subsidiaries, although these companies remain legally independent. The Holding Company monopolizes the authority to make strategic decisions and identify the major trends of its subsidiaries, while leaving decisions of an executive or procedural nature to the boards of directors of these companies.
The holding company also has the authority to delineate the financial policy to be followed by subsidiaries, for example, on how to finance their investments (recourse to bank loans or the stock market) or how to distribute profits (how much reserves the company holds) Or the use of treasury surpluses if they exist (depositing them in bank accounts for interest or operating on the stock exchange).
Role
Holding companies play a pivotal role in the economic life of countries that know the existence of such companies, given their huge investment potential, due to their ability to mobilize large amounts of funds and employ them in large projects requiring large capital (industrial projects and infrastructure projects model).
These companies also have the ability to internationalize the activities of their subsidiaries by opening new branches around the world or acquiring companies outside the borders of their countries of origin.
The global holding companies distribute the stages of the production process to several subsidiaries located in different parts of the world, based on a comprehensive production plan prepared in advance according to the competitive advantages of each country. Holding companies in this way contribute to deepening the process of integration or global economic integration and networking of interests between geographically distant countries.
Due to its economic strength, holding companies have gained significant political weight in their countries and even globally for global holding companies, making them eligible to influence national and international political decision-making in a manner that respects their interests and objectives.
Arabic Models
There are many major holding companies in the Arab world, especially in the Gulf countries, and have achieved success in many sectors (investments, real estate, construction, communications ..).
Forbes magazine’s ranking of the top 100 companies in the Arab world for 2016 shows several holding companies in different positions in this category. For example, KIPCO is ranked 39 with total assets of $ 31.8 billion and a market value of $ 2.6 billion.
It was ranked 49th by Kingdom Holding Company (a subsidiary of Prince Alwaleed Bin Talal) with total assets of $ 11.5 billion and a market value of over $ 11.9 billion.
Ezdan Holding Company (Qatar) was ranked 51th, with total assets of $ 12.9 billion and a market capitalization of $ 13 billion.
The Egyptian company “Global Telecom” Holding (Telecom) ranked 85th with total assets of $ 4.7 billion and a market value of over $ 1.8 billion, followed by the UAE company “Arabtec” Holding (Real Estate and Construction) ranked 90, with a total assets of $ 3.5 billion Its market value exceeded $ 2.2 billion.