A corporate group, company group or business group, also formally known as a group of companies, is a collection of parent and subsidiary corporations that function as a single economic entity through a common source of control. These types of groups are often managed by an account manager. The concept of a group is frequently used in tax law, accounting and (less frequently) company law to attribute the rights and duties of one member of the group to another or the whole.[citation needed] If the corporations are engaged in entirely different businesses, the group is called a conglomerate. The forming of corporate groups usually involves consolidation via mergers and acquisitions, although the group concept focuses on the instances in which the merged and acquired corporate entities remain in existence rather than the instances in which they are dissolved by the parent.[citation needed] The group may be owned by a holding company which may have no actual operations.
In Germany, where a sophisticated law of the "concern" has been developed, the law of corporate groups is a fundamental aspect of its corporate law.[citation needed] Many other European jurisdictions also have a similar approach, while Commonwealth countries and the United States adhere to a formalistic doctrine that refuses to "pierce the corporate veil": corporations are treated outside tax and accounting as wholly separate legal entities.
A corporate group is composed of companies. The general rule is that a company is a separate legal entity from its shareholders, that is the shareholder's liability for the subsidiary's debts is limited to the value of the shares,[1] and the shareholders cannot be required to perform the company's obligations.
However, some jurisdictions create exceptions to this rule. For example, Germany has created affiliated enterprise law which provides situations in which one company is liable for the debts of another company. In New Zealand, the Companies Act provides that the assets of related companies may be pooled to pay the creditors if one of the companies is liquidated. However, the circumstances in which this power will be exercised are very narrow.[2]
Leff[3] defines "business group" as a group of companies that does business in different markets under common administrative or financial control whose members are linked by relations of interpersonal trust on the basis of similar personal ethnic or commercial background. One method of defining a group is as a cluster of legally distinct firms with a managerial relationship.[4][5] The relationship between the firms in a group may be formal or informal.[6] A keiretsu is one type of business group. A concern is another.
Douma and Schreuder (2013) distinguish "horizontal" and "vertical business groups" as follows: 'Business groups can be horizontal or vertical as far as their structure is concerned. In a horizontal business group there is no central holding company – the group companies are connected through various formal or informal ties, including reciprocal shareholding. Thus, a horizontal business group is a rather loose confederation of firms. Coordination between them is achieved mainly by mutual adjustment and standardization of norms. Mitsubishi is a well-known example of a horizontal business group as are many other keiretsu. Chinese groups exhibit similar features. Horizontal business groups are also referred to as "associative business groups". A vertical business group is a group of companies controlled, but not entirely owned, by a single investor. Vertical groups are often organized as pyramids of companies controlled by the main investor through a holding company. A unique feature of pyramidal holdings is that it allows the main investor to exert control with a limited amount of capital. Korean chaebols, Indian business houses and most European business groups are vertical in character. Vertical business groups are also referred to as "hierarchical business groups".[7]
Encarnation[8] refers to Indian business houses, emphasizing multiple forms of ties among group members. Powell and Smith-Doerr[9] state that a business group is a network of firms that regularly collaborate over a long time period. Granovetter[6] argues that business groups refers to an intermediate level of binding, excluding on the one hand a set of firms bound merely by short-term alliances and on the other a set of firms legally consolidated into a single unit. Williamson[10] claims that business groups lie between markets and hierarchies; this is further worked out by Douma & Schreuder.[11] Khanna and Rivkin[12] suggest that business groups are typically not legal constructs though some regulatory bodies have attempted to codify a definition. In the United Arab Emirates, a business group can also be known as a trade association.[13] Typical examples are Adidas Group or Icelandair Group.
Schmitthoff CM, and Wooldridge F, (eds), Groups of Companies (Sweet & Maxwell 1991)
Blumberg PI, The Law of Corporate Groups: Tort, Contract and Other Common Law Problems in the Substantive Law of Parent and Subsidiary Corporations (Little, Brown and Company 1987)
Witting C, Liability of Corporate Groups and Networks (Cambridge University Press 2018)
Morris CHR, The Law of Financial Services Groups (Oxford University Press 2019)
^Business Groups: Between Market and Firm 2006-03-19 at the Wayback Machine by James R. Maclean, October 14, 2005. Accessed May 6, 2006.
^Business Groups in Emerging Markets: Paragons or Parasites? by Tarun Khanna & Yishay Yafeh, August 2005. Abstract accessed May 6, 2006.
^ abGranovetter, M. (1994). "Business groups", in The Handbook of Economic Sociology (J. N. Smelser and R. Swedberg, Eds.), pp. 453–475, Princeton University Press, Princeton.
^Schreuder, Hein (January 2013). "Economic approaches to hybrid forms".
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For the sociological concept see Corporate group sociology A corporate group company group or business group also formally known as a group of companies is a collection of parent and subsidiary corporations that function as a single economic entity through a common source of control These types of groups are often managed by an account manager The concept of a group is frequently used in tax law accounting and less frequently company law to attribute the rights and duties of one member of the group to another or the whole citation needed If the corporations are engaged in entirely different businesses the group is called a conglomerate The forming of corporate groups usually involves consolidation via mergers and acquisitions although the group concept focuses on the instances in which the merged and acquired corporate entities remain in existence rather than the instances in which they are dissolved by the parent citation needed The group may be owned by a holding company which may have no actual operations In Germany where a sophisticated law of the concern has been developed the law of corporate groups is a fundamental aspect of its corporate law citation needed Many other European jurisdictions also have a similar approach while Commonwealth countries and the United States adhere to a formalistic doctrine that refuses to pierce the corporate veil corporations are treated outside tax and accounting as wholly separate legal entities Contents 1 Legal independence 2 Economic dependence 3 Law 3 1 Accounting 3 2 Civil law 3 3 Codetermination 4 Definition 5 See also 6 Further reading 7 NotesLegal independence editMain articles Separate legal personality and Piercing the corporate veil A corporate group is composed of companies The general rule is that a company is a separate legal entity from its shareholders that is the shareholder s liability for the subsidiary s debts is limited to the value of the shares 1 and the shareholders cannot be required to perform the company s obligations However some jurisdictions create exceptions to this rule For example Germany has created affiliated enterprise law which provides situations in which one company is liable for the debts of another company In New Zealand the Companies Act provides that the assets of related companies may be pooled to pay the creditors if one of the companies is liquidated However the circumstances in which this power will be exercised are very narrow 2 Berkey v Third Avenue RailwayEconomic dependence editConcern business DHN v Tower Hamlets LBC EU Seventh Company Law Directive 83 349 on group accounts EU Draft Ninth Company Law Directive on corporate groupsLaw editAccounting edit EU Seventh Company Law Directive 83 349 on group accounts Civil law edit Salomon v Salomon Berkey v Third Avenue Railway Adams v Cape Industries plc Codetermination edit MitbestimmungsgesetzDefinition editLeff 3 defines business group as a group of companies that does business in different markets under common administrative or financial control whose members are linked by relations of interpersonal trust on the basis of similar personal ethnic or commercial background One method of defining a group is as a cluster of legally distinct firms with a managerial relationship 4 5 The relationship between the firms in a group may be formal or informal 6 A keiretsu is one type of business group A concern is another Douma and Schreuder 2013 distinguish horizontal and vertical business groups as follows Business groups can be horizontal or vertical as far as their structure is concerned In a horizontal business group there is no central holding company the group companies are connected through various formal or informal ties including reciprocal shareholding Thus a horizontal business group is a rather loose confederation of firms Coordination between them is achieved mainly by mutual adjustment and standardization of norms Mitsubishi is a well known example of a horizontal business group as are many other keiretsu Chinese groups exhibit similar features Horizontal business groups are also referred to as associative business groups A vertical business group is a group of companies controlled but not entirely owned by a single investor Vertical groups are often organized as pyramids of companies controlled by the main investor through a holding company A unique feature of pyramidal holdings is that it allows the main investor to exert control with a limited amount of capital Korean chaebols Indian business houses and most European business groups are vertical in character Vertical business groups are also referred to as hierarchical business groups 7 Encarnation 8 refers to Indian business houses emphasizing multiple forms of ties among group members Powell and Smith Doerr 9 state that a business group is a network of firms that regularly collaborate over a long time period Granovetter 6 argues that business groups refers to an intermediate level of binding excluding on the one hand a set of firms bound merely by short term alliances and on the other a set of firms legally consolidated into a single unit Williamson 10 claims that business groups lie between markets and hierarchies this is further worked out by Douma amp Schreuder 11 Khanna and Rivkin 12 suggest that business groups are typically not legal constructs though some regulatory bodies have attempted to codify a definition In the United Arab Emirates a business group can also be known as a trade association 13 Typical examples are Adidas Group or Icelandair Group See also editBusiness alliance Chaebol Concern Conglomerate Holding company Keiretsu Subsidiary Zaibatsu Multinational corporationFurther reading editSchmitthoff CM and Wooldridge F eds Groups of Companies Sweet amp Maxwell 1991 Blumberg PI The Law of Corporate Groups Tort Contract and Other Common Law Problems in the Substantive Law of Parent and Subsidiary Corporations Little Brown and Company 1987 Witting C Liability of Corporate Groups and Networks Cambridge University Press 2018 Morris CHR The Law of Financial Services Groups Oxford University Press 2019 Notes edit Salomon v Salomon Lewis Holdings Ltd vs Steel amp Tube Holdings Ltd 2014 NZHC 3311 Leff 1978 663 Business Groups Between Market and Firm Archived 2006 03 19 at the Wayback Machine by James R Maclean October 14 2005 Accessed May 6 2006 Business Groups in Emerging Markets Paragons or Parasites by Tarun Khanna amp Yishay Yafeh August 2005 Abstract accessed May 6 2006 a b Granovetter M 1994 Business groups in The Handbook of Economic Sociology J N Smelser and R Swedberg Eds pp 453 475 Princeton University Press Princeton Schreuder Hein January 2013 Economic approaches to hybrid forms Encarnation 1989 45 Smith Doerr 1994 388 Williamson 1975 1985 Sytse Douma amp Hein Schreuder 2013 Economic Approaches to Organizations 5th edition London Pearson https web archive org web 20150515235236 http catalogue pearsoned co uk educator product Economic Approaches to Organisations 9780273735298 page Archived 2015 05 15 at the Wayback Machine Khanna and Rivkin 1999 Abudhabichamber ae Archived 2008 11 12 at the Wayback Machine Retrieved from https en wikipedia org w index php title Corporate group amp oldid 1218414828, wikipedia, wiki, book, books, library,
