A typical company conducts business and hires staff to produce goods and services and sells these goods and services to receive revenue. An investment holding company is a company that does not conduct any actual business but instead invests in assets. The investment holding company can invest in property, equities or even things like wine or art. It can also own trademarks or patents and invest in other companies running businesses.
According to the Inland Revenue of Singapore (IRAS), an investment holding company refers to a company that owns investments such as properties and shares for long term investment and derives investment income (“non-trade income”) such as dividend, interest or rental income. The company’s principal activity is that of investment holding.
An investment holding company can be a limited liability company, a partnership or a trust. The most common structure used would be a limited liability company. Some families, friends or business partners may incorporate a private company limited by shares and place monies into the company to invest and hold property or equities. This is useful as shareholders of the investment holding company can sell off their shares in the company to anyone instead of having to transfer that asset to another individual if he or she were holding the asset in his or her own name.
An investment holding company may also be loosely be termed as a holding company. A holding company may set up separate subsidiaries. It can wholly or partially own its subsidiaries but may not be involved in the day to day running of these subsidiaries. If can choose to participate in the board of its subsidiaries. This structure also insulates the parent company from any losses incurred by its subsidiaries but if the subsidiaries turn a profit, the parent holding company will benefit.
When in doubt, seek legal advice or consult an experienced ACRA Filing Agent.
The editorial team at Acra Filing Agent
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