Tochtergesellschaft

Tochtergesellschaft, in English commonly translated as subsidiary, is a company that is controlled by another company, the Muttergesellschaft. Control is typically achieved by owning a majority of voting rights or through agreements that grant the parent the power to govern the subsidiary’s financial and operating policies.

Although it operates as a separate legal entity with its own assets and liabilities and a distinct corporate name, a subsidiary’s strategic direction and governance are often aligned with the parent. The parent usually appoints key management and may set budgets, while the subsidiary handles day-to-day operations.

In group accounting, subsidiaries are consolidated in the parent’s financial statements. If the parent does not own 100 percent, minority interests are shown for the portion not owned. Intercompany transactions and balances are eliminated to present the group as a single economic entity.

Subsidiaries can offer advantages such as risk isolation, access to new markets, and centralized financing, but they also create complexity and regulatory obligations. Tax law, transfer pricing, and signaling of control can influence structure and governance.

They can be domestic or international, wholly owned or partially owned, and may take forms such as GmbH, AG, or other legal entities depending on the jurisdiction. The concept is central in corporate law, finance, and economics, and it interacts with the broader notion of a corporate group or Konzern.