Business group
Encyclopedia
A corporate group 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
.
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.
is one type of business group. A concern
is another.
Encarnation refers to Indian business houses, emphasizing multiple forms of ties among group members. Powell and Smith-Doerr state that a business group is a network of firms that regularly collaborate over a long time period. Granovetter argues that business groups refers to an intermediate level of binding, excluding on the one hand a set of firms bound merely by short-term alliances and on the other a set of firms legally consolidated into a single unit. Williamson claims that business groups lie between markets and hierarchies. Khanna and Rivkin suggest that business groups are typically not legal constructs though some regulatory bodies have attempted to codify a definition. In United Arab Emirates
, a business group can also be known as a trade association
. Typical examples are Adidas Group
or Icelandair Group
.
Tax law
Tax law is the codified system of laws that describes government levies on economic transactions, commonly called taxes.-Major issues:Primary taxation issues facing the governments world over include;* taxes on income and wealth...
, 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
Conglomerate (company)
A conglomerate is a combination of two or more corporations engaged in entirely different businesses that fall under one corporate structure , usually involving a parent company and several subsidiaries. Often, a conglomerate is a multi-industry company...
.
In Germany, where a sophisticated law of the "concern
Concern (business)
A concern is a German type of business group. It results from the merger of several legally independent companies an economic entity under unified management. These associated companies called "Group" companies....
" has been developed, the law
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...
of corporate groups is a fundamental aspect of its corporate law
Corporate law
Corporate law is the study of how shareholders, directors, employees, creditors, and other stakeholders such as consumers, the community and the environment interact with one another. Corporate law is a part of a broader companies law...
. Many other European jurisdictions also have a similar approach, while Commonwealth
Commonwealth
Commonwealth is a traditional English term for a political community founded for the common good. Historically, it has sometimes been synonymous with "republic."More recently it has been used for fraternal associations of some sovereign nations...
countries and the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
adhere to a formalistic doctrine that refuses to "pierce the corporate veil": corporations are treated outside tax and accounting as wholly separate legal entities.
Legal independence
- Salomon v Salomon
- Berkey v Third Avenue Railway
Economic dependence
- Concern (business)Concern (business)A concern is a German type of business group. It results from the merger of several legally independent companies an economic entity under unified management. These associated companies called "Group" companies....
- DHN v Tower Hamlets LBC
- EU Seventh Company Law Directive 83/349, on group accounts
- EU Draft Ninth Company Law Directive, on corporate groups
Civil law
- Salomon v Salomon
- Berkey v Third Avenue Railway
- Adams v Cape Industries plcAdams v Cape Industries plcAdams v Cape Industries plc [1990] Ch 433 is the leading UK company law case on separate legal personality and limited liability of shareholders...
Definition
The definition of business group varies. For instance, Leff defines business group as a group of companies that does business in different markets under common administrative or financial control whose members are linked by relations of interpersonal trust on the bases of similar personal ethnic or commercial background a business group. One method of defining a group is as a cluster of legally distinct firms with a managerial relationship. The relationship between the firms in a group may be formal or informal. A keiretsuKeiretsu
A is a set of companies with interlocking business relationships and shareholdings. It is a type of business group. The keiretsu has maintained dominance over the Japanese economy for the greater half of the twentieth century....
is one type of business group. A concern
Concern (business)
A concern is a German type of business group. It results from the merger of several legally independent companies an economic entity under unified management. These associated companies called "Group" companies....
is another.
Encarnation refers to Indian business houses, emphasizing multiple forms of ties among group members. Powell and Smith-Doerr state that a business group is a network of firms that regularly collaborate over a long time period. Granovetter argues that business groups refers to an intermediate level of binding, excluding on the one hand a set of firms bound merely by short-term alliances and on the other a set of firms legally consolidated into a single unit. Williamson claims that business groups lie between markets and hierarchies. Khanna and Rivkin suggest that business groups are typically not legal constructs though some regulatory bodies have attempted to codify a definition. In United Arab Emirates
United Arab Emirates
The United Arab Emirates, abbreviated as the UAE, or shortened to "the Emirates", is a state situated in the southeast of the Arabian Peninsula in Western Asia on the Persian Gulf, bordering Oman, and Saudi Arabia, and sharing sea borders with Iraq, Kuwait, Bahrain, Qatar, and Iran.The UAE is a...
, a business group can also be known as a trade association
Trade association
A trade association, also known as an industry trade group, business association or sector association, is an organization founded and funded by businesses that operate in a specific industry...
. Typical examples are Adidas Group
Adidas
Adidas AG is a German sports apparel manufacturer and parent company of the Adidas Group, which consists of the Reebok sportswear company, TaylorMade-Adidas golf company , and Rockport...
or Icelandair Group
Icelandair Group
Icelandair Group hf is an Icelandic travel industry corporation, the owner of the airline Icelandair and numerous other travel industry companies...
.