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A Subsidiary Post: Securities and Exchange Commission

Not too long ago, I wrote about the Securities and Exchange Commission’s confusing classification of subsidiaries.  See The Case Of The Wholly Owned, But Not Totally Held, Subsidiary That May Or May Not Be 100% Owned.  Since this blog is concerned primarily with California corporate and securities laws, I would be remiss in not adding a mention of the meaning of “subsidiary” under the General Corporation Law:

“subsidiary” of a specified corporation means a corporation shares of which possessing more than 50 percent of the voting power are owned directly or indirectly through one or more subsidiaries by the specified corporation.

Cal. Corp. Code § 189(a).  However, for purposes of Section 703, which denies voting power to shares of a corporation owned by its subsidiary, a “subsidiary” of a specified corporation means a corporation shares of which possessing more than 25% of the voting power are owned directly or indirectly through one or more subsidiaries as above by the specified corporation.  Cal. Corp. Code § 189(b).

Etymologically, the word “subsidiary” is derived from the Latin verb “sedere”, meaning to sit, and the Latin prefix “sub”, meaning beneath or under.  Thus a subsidiary literally is something that sits below something else.

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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
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Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...

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