Group of companies

A corporate group or group of companies is a collection of parent and subsidiary corporations that function as a single economic entity through a common source of control. The concept of a group is frequently used in tax law, accounting and (less frequently) company law to attribute the rights and duties of one member of the group to another or the whole. If the corporations are engaged in entirely different businesses, the group is called a conglomerate. The forming of corporate groups usually involves consolidation via mergers and acquisitions, although the group concept focuses on the instances in which the merged and acquired corporate entities remain in existence rather than the instances in which they are dissolved by the parent. The group may be owned by a holding company which may have no actual operations.

In Germany, where a sophisticated law of the "concern" has been developed, the law of corporate groups is a fundamental aspect of its corporate law. Many other European jurisdictions also have a similar approach, while Commonwealth countries and the United States adhere to a formalistic doctrine that refuses to "pierce the corporate veil": corporations are treated outside tax and accounting as wholly separate legal entities.

A corporate group is composed of companies. The general rule is that a company is a separate legal entity from its shareholders, that is the shareholder's liability for the subsidiary's debts is limited to the value of the shares, and the shareholders cannot be required to perform the company's obligations.

However, some jurisdictions create exceptions to this rule. For example, Germany has created affiliated enterprise law which provides situations in which one company is liable for the debts of another company. In New Zealand, the Companies Act provides that the assets of related companies may be pooled to pay the creditors if one of the companies is liquidated. However, the circumstances in which this power will be exercised are very narrow.

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