A Management Procedure to take Advantage of Minorities
Abstract
A group of companies is often formed and controlled by a single entity, namely the holding or parent company. The holding company has administrative control over the entire group, directing all investment and management decisions. The control can be either direct, meaning the parent company holds the majority of the voting rights of another economic entity of the group, or indirect, through intermediaries holding shares to a third company, and the parent can direct them to vote in its favor. The group has the same strategic mindset, and all decisions are made with the group’s overall growth in mind. Subject to the fact that the companies belonging to a group are being controlled and directed by another entity, a portion of their common stock k is often owned by third parties outside of the group. In accounting and consolidation processes these parties are referred to as the non-controlling interest and their rights as minority voting rights. Usually, such rights exist when a company is open to public offering and independent investors or external companies acquire part of the equity common stock, or when a partial takeover has taken place and the majority of the target’s capital is acquired by the group, in any combination. Minority rights in an economic entity cease at the percentage of the company’s share capital attributable to them. For the group as a whole, minority interests refer to the proportion of the group that is held by third parties. From the holding company’s point of view, the objective is to maximize the value of the group and, by extension, to maximize its shareholders value. In this article, we present a method where the holding company redistributes group’s shares. In addition, by allowing its own shares to trade, resulting in a greater decrease in holdings’ integrated control and a higher increase in its cash inflows.
Keywords: group, participations, minority interest, CF, optimization
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