In brief
A holding company primarily owns shares, investments, intellectual property, real estate, or other assets. An operating company signs customer and supplier contracts, employs people, invoices, receives revenue, and carries the daily commercial risk.
Some groups use one company for both roles. Others place a holding company above one or more operating subsidiaries. Neither approach is automatically better. The correct structure depends on the assets, investors, markets, risks, tax, banking, governance, and cost of maintaining each entity.
When this matters
- A founder is preparing for investment or a future sale.
- A group operates in more than one country.
- Valuable intellectual property or investments need a defined owner.
- Different businesses, partners, or risk profiles need to be separated.
- A new market requires a local operating company beneath an existing group.
Key takeaways
- A holding entity should have a documented purpose; it should not be added only because a structure diagram looks more sophisticated.
- A passive SPV or holding vehicle may not be permitted to trade, employ staff, or provide operational services under its licence.
- Contracts, people, bank accounts, invoices, costs, assets, and decision-making should sit in the entities that actually perform or control them.
- Intercompany loans, services, licences, dividends, and cost sharing need proper documentation and tax review.
- More entities create more governance, accounting, banking, filing, and administration work.
Recommended approach
- Map the current owners, assets, contracts, team, revenue, liabilities, and jurisdictions.
- Decide what the parent should own and what each subsidiary should do.
- Test licensing, legal, tax-residence, substance, transfer-pricing, and banking implications.
- Document the movement of shares, assets, intellectual property, or funds.
- Put intercompany arrangements in writing before transactions begin.
- Establish a governance calendar for both parent and subsidiaries.
What you will usually need
- a current and proposed group chart;
- shareholder and beneficial-ownership information;
- details of assets, intellectual property, contracts, and employees;
- financial statements and expected transaction flows;
- investor, financing, or market-entry requirements;
- constitutional documents and existing shareholder agreements; and
- jurisdiction-specific legal and tax advice where required.
Common mistakes
- Using a passive holding vehicle to perform unlicensed operating activity.
- Moving intellectual property or shares without valuation, consent, or tax analysis.
- Opening multiple entities before confirming banking and recurring costs.
- Letting one company invoice for work performed by another without an agreement.
- Treating the holding company as invisible during KYC or UBO disclosure.
- Failing to record board and shareholder approval for major group decisions.
Kapiti perspective
The starting point is not “Do I need a holdco?” It is “What needs to be owned, where is the business operated, and which risks or stakeholders genuinely need separation?”
Kapiti maps the operating reality first, then compares whether a single company, a parent-subsidiary structure, or a narrower SPV role is proportionate. A good structure should make ownership and decision-making clearer, not create a second layer of unexplained transactions.