What is a Holding Company, and How Does it Work?
Holding companies are specialised entities that own and manage shares or assets in other businesses. They don’t usually engage in daily operations but instead focus on strategic oversight, asset protection, and financial efficiency. Here’s what makes them unique:
Key Features of Holding Companies
- Ownership Role: Holding companies own shares or assets in multiple subsidiaries.
- Asset Protection: They’re great for protecting assets and optimising tax efficiency.
- Centralised Financial Oversight: They manage financial flows and allocate resources among subsidiaries.
- Foreign Exchange Management: They handle currency strategies to mitigate risks and reduce costs.
- Treasury Operations: They centralise funds from subsidiaries and redistribute as needed.
Holding companies are especially common in industries like real estate, manufacturing, and finance. They’re all about strategy—keeping things organised while giving businesses the freedom to grow independently.
Challenges in Opening Business Accounts for Holding Companies
If you’ve tried to open a bank account for a holding company, you know it’s not always straightforward. Traditional banks can be disinclined, especially when it comes to complex structures or non-resident directors.
What Makes It Challenging?
- Compliance Concerns: Banks often need extensive documentation to understand ownership and activities.
- Non-resident Directors or UBOs: These can raise questions with financial institutions.
- Complex Structures: Newly established or offshore holding companies can face extra scrutiny.
- Flow of Funds: Managing cash flow across subsidiaries can lead to delays and inefficiencies without a streamlined solution.
For many banks, holding companies come with perceived risks that can lead to long delays—or even outright rejection. There are ways to overcome these challenges, and we’ll cover that shortly.
{{CTA}}
Does a Holding Company Need a Business Account?
The short answer is yes. A business account is not just a convenience for holding companies—it’s a necessity. Managing multiple subsidiaries with their own operations requires a financial solution that can handle complexity and scale.
Managing Subsidiaries with Individual Accounts
Traditionally, holding companies maintain separate bank accounts for each subsidiary. While this ensures financial separation and clarity for each entity, it also comes with challenges:
- Time-Consuming Oversight: Monitoring and reconciling multiple accounts can become a significant logistical challenge.
- Higher Costs: Separate accounts often mean duplicated fees for account maintenance, transfers, and currency exchanges.
- Complicated Fund Flows: Moving money between subsidiaries can be inefficient, leading to delays and added costs.
The Case for a Unified Platform
Using an all-in-one global payments platform fundamentally transforms financial operations. Instead of managing multiple accounts, holding companies can centralise financial management while still maintaining the flexibility to manage subsidiaries.
- Centralised Control: Manage all your subsidiaries’ finances from a single dashboard.
- Multi-currency accounts: Hold and transact in multiple currencies within a single account to streamline global payments and avoid conversion fees.
- Local Accounts in Your Name: Access local currency account details (IBANs) to eliminate the need to set up multiple bank accounts in different regions and countries.
- Enhanced Efficiency: Simplify fund flows between subsidiaries with faster processing times and reduced transaction complexity.
