Vituvingi- Its not even about the the Carb deal but the overall benefits associated with using a subsidiary in a venture.
Certain developments in a company's lifecycle can trigger the need for a subsidiary, such as the launch of a new venture with different risk characteristics than the company’s existing line of business(CO2 industry is quite new to them) or the opening of operations in a new region or foreign country. Other times, companies need to form subsidiaries to facilitate the potential sale of part of the company.This will also shield itself from possible financial fallout from its new venture and make it easier and faster to acquire or dispose any of the investments held by the subsidiary.
FROM AN ACCOUNTING PERSPECTIVE, creating a subsidiary makes sense because it allows companies to enjoy substantial tax benefits (not so sure) and creditor protections.
But a business doesn’t have to be involved in a risky operation to justify the creation of a new subsidiary. Any time you’re starting a new venture, there’s always risk of loss .You want to protect the profitable part of the business from the losses of the new business you are starting, and by putting the new business into a separate subsidiary, you can do that.So I think Centum is just prudent and cautious n also trying to diversify risk. Kuddos.
Given the benefits associated with forming subsidiaries, it’s not surprising that virtually all sizable companies use them. It’s also not surprising that companies sometimes misuse them.( eg the case of the NewYork Taxi Cabs in US)
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