Subsidiaries and affiliates 1/2

I felt that it would be useful to start a new category: on interpretation guidelines. You will likely have seen those provisions that kindly remind you that referring to one gender includes the other, that the schedules are integral part of the agreement itself et cetera. This category deals with those clauses.

In this blog, I pick a familiar one: on subsidiaries (I will likely come back on it in a later blogs).

Subsidiaries. Although European company directives have defined the concept of a company’s subsidiary (and an affiliate) in clear terms, often large transaction agreements nevertheless provide for a contractual definition. A common definition that meets the EU directive’s definition:

a company is a Subsidiary of another company, its Holding Company, if that other company is a shareholder of it and:

(a)     controls alone, pursuant to an agreement with other shareholders, a majority of the voting rights in it; or

(b)     has the right to nominate, appoint or remove a majority of its management team or board of directors,

or if it is a Subsidiary of a company which itself is a Subsidiary of that other company.

Alternatively (e.g., because the EU member state’s company laws reveal a great variety of possible corporate management structures), a more compact and less statutory terminology driven definition may be preferred.

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