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A corporate group, company group or business group, also formally known as a group of companies, is a collection of parent and subsidiary that function as a single economic entity through a common source of control. These types of groups are often managed by an account manager. The concept of a group is frequently used in tax law and accounting and (less frequently) company law to attribute the rights and duties of one member of the group to another or the whole. If the corporations are engaged in entirely different businesses, the group is called a conglomerate. The forming of corporate groups usually involves consolidation via mergers and acquisitions, although the group concept focuses on the instances in which the merged and acquired corporate entities remain in existence rather than the instances in which they are dissolved by the parent. The group may be owned by a holding company which may have no actual operations.
However, some jurisdictions create exceptions to this rule. For example, Germany has created affiliated enterprise law which provides situations in which one company is liable for the debts of another company. In New Zealand, the Companies Act provides that the assets of related companies may be pooled to pay the creditors if one of the companies is liquidated. However, the circumstances in which this power will be exercised are very narrow.Lewis Holdings Ltd vs Steel & Tube Holdings Ltd 2014 NZHC 3311
Douma and Schreuder (2013) distinguish "horizontal" and "vertical business groups" as follows: 'Business groups can be horizontal or vertical as far as their structure is concerned. In a horizontal business group there is no central holding company – the group companies are connected through various formal or informal ties, including reciprocal shareholding. Thus, a horizontal business group is a rather loose confederation of firms. Coordination between them is achieved mainly by mutual adjustment and standardization of norms. Mitsubishi is a well-known example of a horizontal business group as are many other keiretsu. Chinese groups exhibit similar features. Horizontal business groups are also referred to as "associative business groups". A vertical business group is a group of companies controlled, but not entirely owned, by a single investor. Vertical groups are often organized as pyramids of companies controlled by the main investor through a holding company. A unique feature of pyramidal holdings is that it allows the main investor to exert control with a limited amount of capital. Korean chaebols, Indian business houses and most European business groups are vertical in character. Vertical business groups are also referred to as "hierarchical business groups".
EncarnationEncarnation 1989:45 refers to Indian business houses, emphasizing multiple forms of ties among group members. Powell and Smith-DoerrSmith-Doerr 1994:388 state that a business group is a network of firms that regularly collaborate over a long time period. Granovetter argues that business groups refers to an intermediate level of binding, excluding on the one hand a set of firms bound merely by short-term alliances and on the other a set of firms legally consolidated into a single unit. WilliamsonWilliamson 1975, 1985 claims that business groups lie between markets and hierarchies; this is further worked out by Sytse Douma & Schreuder.Sytse Douma & Hein Schreuder (2013) "Economic Approaches to Organizations", 5th edition, London: Pearson Khanna and RivkinKhanna and Rivkin 1999 suggest that business groups are typically not legal constructs though some regulatory bodies have attempted to codify a definition. In the United Arab Emirates, a business group can also be known as a trade association.[http://www.abudhabichamber.ae/User/NewsDetail.aspx?NewsId=863 Abudhabichamber.ae Typical examples are Adidas or Icelandair Group.
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