According to the EU, it’s one economic unit with one source of control. In other words, you could be one company (or ‘entity’) or a few companies working to a shared goal:
A parent company can form one undertaking with its subsidiaries
In these cases, the subsidiary wouldn’t make their own plans. They’d just carry out the instructions and aims given to them by the parent company. It’s called ‘decisive influence’..
Here’s what ‘decisive influence’ looks like
It could be that the subsidiary relies on financing from the parent for day-to-day business spending (‘working capital’). Or it could be that the two companies share board members. Or the parent company might actually exercise control of the subsidiary by getting involved in how it’s run (directly or indirectly). All those things count as ‘decisive influence’.
What about ownership?
Where a subsidiary company is 100% (or close to 100%) owned by a parent company, it’s presumed that they’re the same undertaking(and that the parent company will have a decisive influence over them). This applies through a chain, too: if Company A owns 100% of the shares in Company B and Company B owns 100% of the shares in Company C, they’re probably all the same undertaking.
Just because a parent company holds a majority interest in a subsidiary, they’re not necessarily the same undertaking
Although they might be if the parent company exercises its voting rights or appoints members to the board of directors. Again, those things count as a decisive influence.
If the parent company has a minority share in a subsidiary, then they’re probably not one undertaking
Unless that the parent company still has decisive control over the subsidiary (like veto rights or appointing board members).
In the case of a limited liability company (other than an SME that has been in existence for less than three years or, for the purposes of eligibility for risk finance aid, an SME within 7 years from its first commercial sale that qualifies for risk finance investments following due diligence by the selected financial intermediary), where more than half of its subscribed share capital has disappeared as a result of accumulated losses. This is the case when deduction of accumulated losses from reserves (and all other elements generally considered as part of the own funds of the company) leads to a negative cumulative amount that exceeds half of the subscribed share capital. For the purposes of this provision, ‘limited liability company’ refers in particular to the types of company mentioned in Annex I of Directive 2013/34/EU (1 ) and ‘share capital’ includes, where relevant, any share premium.
In the case of a company where at least some members have unlimited liability for the debt of the company (other than an SME that has been in existence for less than three years or, for the purposes of eligibility for risk finance aid, an SME within 7 years from its first commercial sale that qualifies for risk finance investments following due diligence by the selected financial intermediary), where more than half of its capital as shown in the company accounts has disappeared as a result of accumulated losses. For the purposes of this provision, ‘a company where at least some members have unlimited liability for the debt of the company’ refers in particular to the types of company mentioned in Annex II of Directive 2013/34/EU.
Where the undertaking is subject to collective insolvency proceedings or fulfils the criteria under its domestic law for being placed in collective insolvency proceedings at the request of its creditors.
Where the undertaking has received rescue aid and has not yet reimbursed the loan or terminated the guarantee, or has received restructuring aid and is still subject to a restructuring plan.
In the case of an undertaking that is not an SME, where, for the past two years: (1) the undertaking's book debt to equity ratio has been greater than 7,5 and (2) the undertaking's EBITDA interest coverage ratio has been below 1,0.