A Holding Company is a type of parent corporation that primarily exists to own and control shares of other companies rather than producing goods or services itself. Its main purpose is to manage, oversee, and control subsidiary companies while reducing overall business risk and streamlining corporate structure.

In a typical structure, the holding company owns more than 50% of the voting shares of its subsidiaries, giving it controlling interest. These subsidiaries continue to operate as separate legal entities but remain under the strategic and financial control of the holding company. For example, a large conglomerate may have a holding company structure that owns businesses across finance, manufacturing, and technology sectors.

One of the major advantages of a holding company is risk management. Since each subsidiary operates independently, financial or legal troubles in one entity usually do not affect others. Additionally, it allows for tax efficiency through consolidation of financial results and optimized capital allocation across subsidiaries.

From a governance perspective, holding companies can facilitate better oversight and strategic coordination. However, they may also face challenges such as complex regulatory compliance, management inefficiencies, and conflicts of interest between the parent and its subsidiaries.

In India, holding companies are regulated under the Companies Act, 2013, and must disclose their ownership structure and related party transactions to maintain transparency. Prominent examples include Tata Sons (holding company of the Tata Group) and Reliance Industries Limited, which holds stakes across multiple sectors.

In essence, a Holding Company acts as the controlling backbone of a business group, enabling centralized management and financial stability while allowing its subsidiaries operational independence.