Comments on: Using and Defining “Subsidiary” http://www.adamsdrafting.com/2009/03/20/using-and-defining-subsidiary/ Tue, 31 Jan 2012 01:23:03 +0000 hourly 1 http://wordpress.org/?v=abc By: AdamsDrafting » Blog Archive » Affiliates or Subsidiaries as of When? http://www.adamsdrafting.com/2009/03/20/using-and-defining-subsidiary/comment-page-1/#comment-94503 AdamsDrafting » Blog Archive » Affiliates or Subsidiaries as of When? Mon, 28 Dec 2009 12:48:06 +0000 http://www.adamsdrafting.com/2009/03/20/using-and-defining-subsidiary/#comment-94503 [...] this depends on the context. But let’s consider the definition of subsidiary I offered in this March 2009 post. If I wanted to make it clear that the scope of the definition is to be adjust to reflect changes [...] [...] this depends on the context. But let’s consider the definition of subsidiary I offered in this March 2009 post. If I wanted to make it clear that the scope of the definition is to be adjust to reflect changes [...]

]]> By: Gary Hoffman http://www.adamsdrafting.com/2009/03/20/using-and-defining-subsidiary/comment-page-1/#comment-92782 Gary Hoffman Tue, 18 Aug 2009 20:14:52 +0000 http://www.adamsdrafting.com/2009/03/20/using-and-defining-subsidiary/#comment-92782 It is most likely that the term "subsidiary" will be used in the context of a commercial transaction. If the intent is to encompass all forms of legal entities, then the term "business organization" as defined in the ALI's Principles of Corporate Governance may suffice. A business organization is defined as "an organization of any form (other than an agency or instrumentality of government) that is primarily engaged in business, including a corporation, a partnership or any other form of association, a sole proprietorship, or any form of trust or estate." Section 1173(1) of the Companies Act 2006 has a somewhat similar concept encapsulated in the term "firm," which means "any entity, whether or not a legal person, that is not an individual and includes a body corporate, a corporation sole and a partnership or other unincorporated association." According to general usage, a firm is associated with a commercial or business undertaking. So I do not think it is a stretch to say that a firm is basically the same as a business organization. It is most likely that the term “subsidiary” will be used in the context of a commercial transaction. If the intent is to encompass all forms of legal entities, then the term “business organization” as defined in the ALI’s Principles of Corporate Governance may suffice. A business organization is defined as “an organization of any form (other than an agency or instrumentality of government) that is primarily engaged in business, including a corporation, a partnership or any other form of association, a sole proprietorship, or any form of trust or estate.”

Section 1173(1) of the Companies Act 2006 has a somewhat similar concept encapsulated in the term “firm,” which means “any entity, whether or not a legal person, that is not an individual and includes a body corporate, a corporation sole and a partnership or other unincorporated association.” According to general usage, a firm is associated with a commercial or business undertaking. So I do not think it is a stretch to say that a firm is basically the same as a business organization.

]]> By: Art http://www.adamsdrafting.com/2009/03/20/using-and-defining-subsidiary/comment-page-1/#comment-84842 Art Mon, 23 Mar 2009 12:46:56 +0000 http://www.adamsdrafting.com/2009/03/20/using-and-defining-subsidiary/#comment-84842 The UK Companies Act has definitions of "subsidiary" (companies only), "subsidiary undertaking" (including partnerships and unincorporated associations - we do not have LLCs), "group undertaking", "holding company" etc, and UK agreements tend to refer back to the Companies Act when defining those terms. The definitions are fairly immune to work-arounds (via informal control), the principles are well-established and understood by the courts and the parties are likely to be both be comfortable with using them, which make them generally by far the best option. However, I have no idea whether there are similarly useful definitions in any US statutes. The UK Companies Act has definitions of “subsidiary” (companies only), “subsidiary undertaking” (including partnerships and unincorporated associations – we do not have LLCs), “group undertaking”, “holding company” etc, and UK agreements tend to refer back to the Companies Act when defining those terms.

The definitions are fairly immune to work-arounds (via informal control), the principles are well-established and understood by the courts and the parties are likely to be both be comfortable with using them, which make them generally by far the best option. However, I have no idea whether there are similarly useful definitions in any US statutes.

]]> By: Ken Adams http://www.adamsdrafting.com/2009/03/20/using-and-defining-subsidiary/comment-page-1/#comment-84691 Ken Adams Sun, 22 Mar 2009 00:47:34 +0000 http://www.adamsdrafting.com/2009/03/20/using-and-defining-subsidiary/#comment-84691 Bruce: Great comment. Even when coming up with language as unexciting as a definition of <em>subsidiary</em>, one encounters specialized issues. Ken Bruce: Great comment. Even when coming up with language as unexciting as a definition of subsidiary, one encounters specialized issues. Ken

]]> By: Bruce Eddy http://www.adamsdrafting.com/2009/03/20/using-and-defining-subsidiary/comment-page-1/#comment-84690 Bruce Eddy Sun, 22 Mar 2009 00:41:21 +0000 http://www.adamsdrafting.com/2009/03/20/using-and-defining-subsidiary/#comment-84690 Your suggested definition implies that a trust and a partnership are legal entities which may not be the case. The term "legal entity" is not unduly strained by extending to a partnership even though a partnership is not a legal "person" in the same way that a corporation is. But for some trusts - such as non-commercial trusts - the real owners of the trust assets are the beneficiaries who often have no say in the choice of the trustees. Perhaps your definition is not intended to extend to trusts other than those whose governance resembles that of corporations. Your suggested definition implies that a trust and a partnership are legal entities which may not be the case. The term “legal entity” is not unduly strained by extending to a partnership even though a partnership is not a legal “person” in the same way that a corporation is. But for some trusts – such as non-commercial trusts – the real owners of the trust assets are the beneficiaries who often have no say in the choice of the trustees. Perhaps your definition is not intended to extend to trusts other than those whose governance resembles that of corporations.

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