What is intra-group

What is a corporation? Definition and examples


Group, holding company, parent company: differentiation

The terms holding company and group overlap in many ways. In practice, the organizational forms of a group and a holding are very often similar. Therefore, the terms are often used synonymously.

unified management
legally defined in the Stock Corporation Actno legal definition
at least 2 independent companiesat least 2 independent companies (mother and daughter)
not limited to certain legal formsnot limited to certain legal forms
legal termDescriptive term for economic organizational structure

Definition group

Basically, a group is the amalgamation of several (large) companies to form an economic unit. The affiliated companies are either dominant or dependent: the parent company performs a dominant role as central group management, while subsidiaries are the dependent units. In order to be considered a group, all that is required is a parent company and a subsidiary, with the subsidiary giving up its economic and financial independence. However, the daughter remains legally independent.

According to Sections 15 to 19 of the German Stock Corporation Act, a group consists of at least two legally independent companies and uniform management. The concept of the group originally comes from stock corporation law and initially only applied to the stock corporation (AG) and the partnership limited by shares (KGaA). The term group is now used for affiliated companies of any legal form.

Differentiation from the holding company

The holding company is the uppermost, ie the parent company, which “holds” the dependent companies. It is also known as the umbrella company. However, a holding company is not a separate legal form, but rather an organizational structure that enables entrepreneurs to keep an overview of their various companies. Every holding structure consists of at least two companies. While a holding company is not clearly defined by law, the form of a group is defined in the German Stock Corporation Act.

What are parent companies and what are subsidiaries?

Parent companies are the superordinate, controlling companies, while the subsidiaries are always subordinate.

Examples for a group

There are innumerable ways in which a corporation can be structured. If we take a close look at a well-known corporation, it becomes clear how complex the structure and structure of a corporation can be.

Group example: Bertelsmann

In this greatly simplified flowchart for the Bertelsmann Group, you can see how diverse companies can be. Each subsidiary has additional subsidiaries and sister companies. So-called intermediate companies (which are mostly located in low-tax countries) have also been added to the group, which serve for asset management and thus carry out a purely organizational (financial) and non-executive activity. In addition, the individual companies in the group structure have different legal forms: AG, GmbH, the French Société Anonyme (S.A.) and the special form of GmbH & Co. KG.


Group formation: How does a group come about?

The bigger a company gets, the more useful it becomes to split up economic risks. For many companies, expansion is only possible in this way. With the formation of a group there are many opportunities to withstand changes in the influencing factors of a complex market. In this way, parts of the operational business can be distributed over several companies.

The dependency or control arises through equity participation (§ 16 AktG) or a domination and profit transfer agreement (Section 291 AktG). Some entrepreneurs set up a holding structure right from the start in order to financially consolidate the resulting group and create a clear structure with regard to liability.

Contract group

A contract group in accordance with Section 291 of the AktG is created through the conclusion of a domination or profit and loss transfer agreement. The authority to issue instructions and thus a uniform management is anchored here, which leads to a strong form of group loyalty. The dependent company hereby submits its management to the controlling company.


The most intensive form of group law subordination is the integration according to §§ 319 ff. AktG. It represents an intermediate stage between the merger of two companies and a contract group. It is assumed here that the controlling company owns all the shares in a company and thus has the right to issue instructions and assets. In contrast to the merger of two companies, the integrated company remains as a legal person. In the event of integration, instructions that threaten the existence of the dependent company may even be issued. However, the ruling company is liable for all liabilities here.

De facto group

In contrast to the contract group and integration, the management structure and asset protection of the dependent company within a de facto group in accordance with Sections 311 to 318 of the German Stock Corporation Act (AktG) remain intact. In the case of a de facto group, there is no domination agreement: The dominant company exercises its actual control through other company agreements or another justified dependency, such as a majority shareholding.


The larger and more structured a group is, the more often it happens that group levels are installed, each of which forms a subgroup. Subgroups are particularly relevant for the accounting of a group, since parts of a group may be considered separately.

Differentiation from joint ventures

In so-called joint ventures, several companies come together to form a cooperation. Control is not with the parent company, as is usual in a group, but with the subsidiary. Thus, just like with nesting companies, it can be difficult to find out who is responsible.


Economic structure of a group

In corporations there are not only a wide variety of structure options with regard to the legal forms that can be broken down within the group, but also various business forms:

Vertical group

A vertical group refers to the amalgamation of companies from different stages of production, which covers a broad spectrum of the services offered or their production itself and thus produces independently of the services of external companies. The individual companies are placed along the value chain:

Extraction of raw materials


1. Processing stage

2nd processing stage


IKEA is a well-known example: From design to production, purchasing, logistics and sales, all corporate areas are vertically structured within a group.

The form of the vertical group is nowadays partly obsolete, as many companies obtain the cheapest possible supply parts or raw materials from external, foreign companies. Recently there has also been a counter-movement against this movement, which refers to its own production or harvest and thus offers the customer a transparent service from a single source.

Horizontal group

The economic form of the horizontal group describes a group in which several companies are organized on the same hierarchical level within the group. For example, many manufacturers produce both low-end and high-end products in order to monopolize their market.

Bayer AG is an example of a horizontal group in Germany. The major operational areas of pharmacy, prescription-free health products and crop protection are arranged side by side.

Diagonal, lateral or conglomerate

A conglomerate, also known as a diagonal or lateral group, describes the amalgamation of companies from different industries. Other names are multicompany or conglomerate. The main feature here is the strong diversification of the individual companies.

A prominent example of a conglomerate is the Trump Organization owned by Donald Trump. It is a multicompany consisting of very different business areas such as real estate, hotel, golf, education and clothing.

Organic and inorganic corporations

These terms do not describe the structural structure of a group, but the economic relationship between the independent companies. Organic corporations arise when (branch) related companies merge (see examples from IKEA and Bayer). In contrast, inorganic corporations are characterized by the lack of economic reference to the individual elements (see example of the Trump Organization).

Organizational structure of a group

A distinction is not only made between different corporate forms on the business level, but also on the hierarchical level: a basic distinction is made between subordinate and homogeneous groups.

Subordinate group

A subordinate group is an amalgamation of several companies that, like subsidiaries, give up their economic independence, but remain legally independent. The subordinate groups submit to a uniform management; this is usually done by the parent company, which is at the highest level in the hierarchy. A subordinate group is established through the conclusion of a domination agreement.

Equal order group

It differs from the subordinate group in that the merged companies are not dependent on any superordinate, ruling company; the management bodies of the group with equal order are contractually regulated in coordination with the affiliated companies. The companies of the group are therefore in an equal position without a higher hierarchical level. Companies at the lower levels are given the opportunity to exert influence on corporate policy through shareholdings, for example. The group of equal order is found relatively rarely in practice, while the subordinate group is the typical variant from practice.


Organizational forms of the holding company

The holding company is the parent company of a group that holds the other affiliated companies. How many shares the mother owns in one or more daughters is irrelevant. The holding company serves the organization within the group, but can also take different forms:

  • Operational holding: In an operational holding company, the parent company is the largest company in the entire group structure and is operationally active. The mother strongly influences the subsidiaries.
  • Management holding: In the case of the holding company, for example, strategic control and the control of the flow of capital are specified by the parent for all subsidiaries.
  • Financial holding: This form of holding only has an asset management function. The parent company of the financial holding often acts as the group's own bank, supplying capital to all subordinate subsidiaries.
  • Organizational holding: In the case of an organizational holding company, the group structure serves to separate the business activities of the parent company into several companies. The holding company only serves to keep track of the companies and business areas.


Corporate liability

While there are clear principles of liability for a holding company, the situation is different for a group. Although most holding structures conceptually overlap with those of a group, different rules apply here: Within holding structures, liability always depends on the legal form of the subsidiary. If the subsidiary is a partnership, the holding company is jointly and severally liable. If these are corporations, liability remains with the respective subsidiary.

Within a group, liability can vary between the individual companies in the group. In principle, the affiliated company's own and exclusive liability for the obligations it has entered into applies. However, the economic interdependence of the group-internal companies is of the utmost importance: Since a large number of companies in Germany are group-related, the question arises for many creditors whether not only the company concerned is liable, but also the entire group or the parent company.

Liability for subordinate groups

In the case of subordinate groups, the domination agreement prevents the subsidiaries from incurring an annual deficit: the parent company must compensate for the loss. Due to the loss assumption obligation, the parent company is also liable for liability claims of the dependent companies - but this only applies if the parent company has exceeded or abused its rights of instruction (legal, contractual). Another scenario is the breach of the management's duty of loyalty, which causes a so-called existence-destroying intervention. Should the parent company use its dominant influence to enter into transactions that are detrimental to the subsidiary, the parent must compensate for the damage incurred in the current financial year.

Liability in corporations with equal order

Often it is difficult for the courts of justice to assess which legal person has liability claims against which there are legal entities. The legal situation is so complex because a management contract is concluded between the subordinate and superordinate companies, but this does not count as a company agreement within the meaning of the Stock Corporation Act. That is why the courts of law pay close attention to loss compensation. Loss compensation occurs when the company is split up, i.e. the company has been split up, for example into an organizational and an operational company. Since there is no control agreement or a uniform (higher-level) management that can be consulted with a group of equal order, the direct liability applies in this case.

Consolidated Financial Statements

The annual or interim financial statements of a group are referred to as consolidated financial statements. It bundles the asset, financial and earnings situation for all companies affiliated with the parent company and thus provides an overview of the entire group for outsiders. In order to create the consolidated financial statements, all the individual financial statements are first bundled, standardized and offset to form a consolidated financial statement. This serves to better assess the entire group. Business relationships are entered into within a group that independent, separate companies would otherwise not enter into (e.g. profit and loss transfer agreements). Thus, individual sub-companies cannot be clearly viewed separately.

In the case of consolidated financial statements, the partial financial statements are still adjusted after the merger: All economic relationships and interdependencies between the companies in the group are adjusted through consolidation measures - the standard fiction. The consolidated financial statements stand on their own and can be viewed as the financial statements of a single company.

The individual annual financial statements of the subsidiaries and parent companies are generally less meaningful due to the many business relationships within the group.


Tax peculiarities for corporations

In addition to the economic risk, a group also reduces the tax burden for the individual company. Some tax law peculiarities apply to corporations. According to the law, entrepreneurs who run several companies would have to pay certain types of tax more than once, depending on how many companies they own. In order to avoid this double taxation, there is, among other things, the so-called box privilege, with which corporations can benefit from reduced corporate or trade tax.


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