Tütarettevõtte

tütarettevõte, or subsidiary, is a company that is controlled by another company, usually through ownership of the majority of its voting shares. The parent, often called emaettevõte in Estonian, exercises significant influence over the subsidiary’s strategic direction, management appointments, and major policies, while the subsidiary remains a separate legal entity with its own assets and liabilities.

Control can be achieved through outright ownership of more than half of the voting shares, but it can also be established by other arrangements that give the parent de facto decision-making power. The subsidiary may operate in the same country as the parent or in a different jurisdiction, and it often has its own corporate governance structure and management team.

In financial reporting, subsidiaries are typically consolidated with the parent’s financial statements. This means combining the subsidiary’s assets, liabilities, revenues, and expenses with those of the parent and eliminating intercompany transactions. The subsidiary prepares its own statutory accounts according to local laws, and may pay dividends or provide loans to the parent, subject to applicable regulations and tax rules.

Subsidiaries are commonly used to isolate legal and financial risk, enter new markets, or specialize in particular lines of business. They can be wholly owned or partially owned, with non-controlling interests representing the portion not held by the parent. The legal and regulatory environment of each jurisdiction governs governance, reporting requirements, and cross-border activities.