What is subsidiary?

A subsidiary is a company that is owned or controlled by another company, referred to as the parent company or holding company. The subsidiary operates as a separate legal entity from the parent company and has its own management, assets, liabilities, and profits or losses.

In the context of human resources, a subsidiary may have its own HR department responsible for managing the employment practices and policies of its employees. However, the HR department of the parent company may also be involved in overseeing the subsidiary’s HR functions, especially in areas such as recruitment, compensation and benefits, and compliance with legal and regulatory requirements.

Subsidiaries are often established for various reasons, such as expanding into new markets, diversifying the business, or acquiring specific assets or intellectual property. They can provide many benefits to the parent company, including increased revenue and market share, access to new resources, and improved operational efficiency.

Managing HR in a subsidiary can present unique challenges, such as navigating cultural differences, complying with local employment laws and regulations, and integrating HR policies and practices across the parent company and subsidiary. Effective communication, collaboration, and alignment between the parent company and subsidiary HR departments are key to successfully managing HR in a subsidiary.


Key takeaways

  • A subsidiary is a company that is independent of its parent or holding company, but more than 50% of its ownership belongs to the parent company. The subsidiary is a distinct legal entity separate from its parent company.
  • Parent companies establish or purchase a subsidiary to obtain specific assets or synergies, secure tax benefits, and limit potential losses. They do not require shareholder approval to establish a subsidiary or sell it.
  • The financial statements of a subsidiary are reported on the consolidated financial statements of its parent company. 
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