Can You Differentiate Between Cartel And Trust And Explain The Advantages Of A Holding Company?

Cartel is horizontal combination and trust is vertical. In trust, trust certificates are issued but in cartel no such certificates is given. Management of trust is board of trustee whereas management of cartel is decentralized.

Holding company

This firm is used for owning and controlling of business. In this firm, one company holds the securities of other company. It is called holing company. The company whose shares are held is called subsidiary company. Generally both companies are engaged in similar nature of business. To become holding company, a company must have more than 50% of issued capital of other company.

A holding company is in a position to raise more capital, because a number of financing instruments are available to the companies like share, debentures, bonds and retained earnings etc, the life of the holding company compare to the sole proprietorship and partnership is very stable. If the business remains well managed, it can live on indefinitely. The liability of the share holder is limited to the nominal value of the shares held by them. It means if a company fails to pay its obligations, the personal properties of the share holders cannot be sold for the settlement of business debts.

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