Pure Passive / Active Equity Holding
Holdings can be simply divided into two types: Pure Passive Equity Holdings and Active Equity Holdings.
A holding company is any company that owns a majority stake in a company and may itself be a general enterprise, but its existence is only a company holding shares. These holding companies do not produce their own goods or services for the sole purpose of capital operations in the form of mere shareholdings. This is a pure equity holding company.
Its core income-generating range:
1) An enterprise will be controlled solely by equity if it does not hold any investment other than an equity interest that will result in dividends or capital gains.
2) If the enterprise holds any other form of investment (e.g. interest-bearing bonds), it is not a pure equity holding.
3) If an enterprise holds equity and holds other forms of assets, such as bonds, government securities, or real estate beneficial rights, the enterprise shall be deemed not to be engaged in holding business, but shall still examine whether the company is engaged in other related activities such as trade and other related activities to meet the economic substantive requirements.
Does your company’s operating model belong to pure equity holdings?