Upon reaching a decision to organize or acquire a subsidiary corporation, the business enterprise parent controls its subsidiary by being its sole stockholder. By holding, i.e., owning all of the subsidiary's voting stock, the parent has the power to elect and remove the entire board of directors.
To maintain control of a subsidiary and at the same time allow the subsidiary to operate as an independent entity under the direction of its board of directors, a parent business enterprise should: (1) be the sole shareholder; (2) include voting control provisions in the subsidiary's articles of incorporation along with provisions that prohibit amendment of the articles without the approval of the sole shareholder; (3) prepare comprehensive bylaws defining the designation and authority of officers, their term of office, their removal (for cause, or for any or no reason); (4) include in the bylaws the procedure whereby the parent elects and removes directors; and (5) prohibit bylaw amendments
Orignal From: How Does The Parent Control An Independent Subsidiary?
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