Sandra Goudie: Subsidiary Companies

Recently I sat in on a select committee for 3 Waters concerning the Water Services Economic Efficiency and Consumer Protection Bill.

Forget it folks.  One glaring example - the Chair of the select committee didn’t appear to know anything about subsidiary companies. Even in spite of the fact that it is in large part stepped out in the Bill.

Subsidiary Companies are stand alone companies with their own constitution’s and decision making.

Yes, there are obligations back to the parent company, but tenuous at best. Given the potential makeup of the parent company, the ensuing separate governing board for a subsidiary plus separate constitution, and the parent company representatives that may be on the governing board, (often small in number) there is no real protection. The ‘shareholders of the subsidiary may well only be company representatives and not actually be the same shareholders of the parent company.

Look at Fonterra and its construct to understand the model and the disenfranchisement of shareholders with the various arms of the companies built on the hard working backs of our food producers.

So why the concern? The original assets and infrastructure, what we have now, begin in the parent company. New infrastructure and assets can be established via a subsidiary. The subsidiary, in the interests of the company of course, can own, sell or dispose of those assets as it decides.

Only by ensuring consumers as shareholders via parent company shareholding representatives are shareholders of ANY subsidiary, is there continued shareholder ownership and accountability.

Sandra Goudie is a retired Mayor and former Member of Parliament.