Almost every lawyer involved in financial matters must have faced the difficulty in finding the difference between these terms.
Below are basic definitions intended to clarify the difference.
Associate: An associate (associated company) is a company, in which not less than 20% and not more than 50% of the shares are held by another company.
Subsidiary: A subsidiary (subsidiary company) is a company, in which not less than 50% of the shares are held by another company.
Affiliate: An affiliate (affiliated company) is a company, in which more than 20% of the shares are held by another company.
So, every associate (company, held by 20% to 50%) is an affiliate. Also, every subsidiary (company, held by more than 50%) is also an affiliate. However, the term affiliate often refers to companies that have the nature of an associate rather than subsidiary.
In addition; a subsidiary company is subsidiary to its parent company only. Similarly, an associate company is associate to its parent company only. However, an affiliate company is affiliate both to its parent company and its sister companies.
Note that foregoing definitions are given in general terms of the law. Some jurisdictions may provide for different definitions of these terms. For instance, Internal Revenue Service legislation applicable in USA defines affiliate as a company, in which not less than 80% of the voting shares are held by another company. Therefore, one must check the applicable legislation before considering the meaning of these terms.
Below are basic definitions intended to clarify the difference.
Associate: An associate (associated company) is a company, in which not less than 20% and not more than 50% of the shares are held by another company.
Subsidiary: A subsidiary (subsidiary company) is a company, in which not less than 50% of the shares are held by another company.
Affiliate: An affiliate (affiliated company) is a company, in which more than 20% of the shares are held by another company.
So, every associate (company, held by 20% to 50%) is an affiliate. Also, every subsidiary (company, held by more than 50%) is also an affiliate. However, the term affiliate often refers to companies that have the nature of an associate rather than subsidiary.
In addition; a subsidiary company is subsidiary to its parent company only. Similarly, an associate company is associate to its parent company only. However, an affiliate company is affiliate both to its parent company and its sister companies.
Note that foregoing definitions are given in general terms of the law. Some jurisdictions may provide for different definitions of these terms. For instance, Internal Revenue Service legislation applicable in USA defines affiliate as a company, in which not less than 80% of the voting shares are held by another company. Therefore, one must check the applicable legislation before considering the meaning of these terms.
