Duhaime's Law Dictionary


Subsidiary Definition:

A corporation subordinate to a dominant company which is able, through share ownership, to exert influence or control over its affairs.

In Glassman, Justice Philp adopted these words to define a subsidiary:

"... a company that is subordinate to the dominant company which is able, through share ownership, to exert influence or control over its affairs ... one that is run and owned by another company which is called the parent. In fact, to control, the parent company must own more than 50% of a voting stock of the subsidiary."

In a 1938 tax case, Wilson, Justice Mclean had noted:

"[A] subsidiary company ... it may be said to mean a corporation the capital stock of which is owned or controlled by another company, usually called a holding company, the business of the holding company and the subsidiary company being of the same class....

"Ordinarily, a holding company is one which acquires the whole or a controlling interest in the share capital of one or more distinct businesses, thereby for practical purposes effectively amalgamating them and consolidating their interests. The types of business carried on by a holding company and its subsidiaries may vary greatly, and it is not necessary that they be of the same class."

In Cominco, Justice Gibbs wrote:

"Subsidiary is a commonly used word ... as subordinate, secondary. Coupled with the adjective controlled, in the context of corporate affairs it means that the company so described is subordinate to a dominant company which is able, through share ownership, to exert influence or control over its affairs."

REFERENCES:

  • Cominco Ltd. v. Canadian Pacific Ltd., 24 B.C.L.R. (2d) 124 (1988, BCSC)
  • Duhaime, Lloyd, Commercial Law
  • Glassman v. Honda Canada Inc., 22 M.V.R. (3d) 238 (1996, Ontario Court of Justice (General Division)
  • Wilson v. Minister of National Revenue, [1939] 1 D.L.R. 678 (Exchequer Court of Canada)

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