The business model called holding company, with legal provision in §3 of Article 2 of the Corporations Law (Law No. 6.404/76)is a company incorporated for a specific purpose: corporate participation and/or administration of assets. In addition, it can also be used for succession planning, in order to program the moment of succession of assets upon the death of the founding partner.

Depending on the choice of delimitation of the economic activity to be developed, that is, on the objectives for creating the company, the holding company may adopt the pure, mixed/operational or ownership types. A pure holding aims at holding quotas or shares in another company, whereas a mixed holding also aims at exploring the business/productive activity. Asset holding companies, on the other hand, are set up with the purpose of concentrating assets within the company in order to improve the management of assets and capital.

Just like any other company formation, a holding company goes through the process of creating a legal entity: adoption of the corporate type (limited liability company or joint stock company), subscription and payment of the assets to the company's capital stock, conversion into quotas or shares, registration of the corporate acts at the Board of Trade, transfer of title and ownership of the assets to the legal entity, among others.

In the financial, administrative, legal, and corporate aspects, it has a series of advantages, among them the better organization of assets and capital in order to better face eventual contingencies; the possibility of succession planning, with the reduction of the risk of litigation between heirs and the speeding up of the transmission of inheritance, as well as the generation of savings of all kinds of expenses (including tax); an adequate tax planning that provides greater tax savings.

In order to achieve the best benefits and avoid potential disadvantages, however, it is important that the incorporation and structuring of holding companies be well studied based on the purposes of their incorporators and the circumstances of each specific case. With a thorough and careful multidisciplinary analysis, the holding company may represent an important asset organization instrument, helping to mitigate and control risks and generating significant savings in time and resources.

By: Caroline Urdapilleta Wagner

Corporate Law | CPDMA Team