associated company(redirected from related company)
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related companya JOINT-STOCK COMPANY in which another company, the HOLDING COMPANY, has a significant but not controlling shareholding (specifically 20% or more of the voting shares but not more than 50%). In such a situation the investing company can exert influence on the commercial and financial policy decisions of the associated company though in principle the associated company remains independent under its own management, producing its own annual accounts, and is not a SUBSIDIARY COMPANY of the holding company.
If the second company held 50% or more of the first company's shares then the first company's assets and profits would be consolidated with those of the second, and the two companies would be regarded as part of the same group of firms. Where the second company holds 20% or more of the first company's shares then it must note in its own accounts information about the profits, capital and reserves of the first company in which it is heavily invested. If the second company holds less than 20% of the first company's shares it may still exercise influence over that company though it is not obliged to disclose details of its shareholding. See CONSOLIDATED ACCOUNTS.