Holding companies are companies whose principle business is investment in subsidiary companies (the companies held by holding companies).  This is different from operational companies who are engaged in some form of business activity.  According to the position taken by the Securities Authority, the laws of disclosure currently applicable to holding companies are not sufficient, since they advance the real activities of the subsidiary companies. For any reasonable investor it is important to understand, inter alia, the manner in which holding companies manage their holdings and the relationship between them and the companies held by them.  

As a rule thumb, a holding company is a company focused on the maintenance, including the management, of the companies over which it has influence, if not significant influence; while the holding company itself has not substantial business activity of its own except for that of the companies held by it. In addition, this usually concerns a group which is active in at least three different sectors via the companies held in the group. Naturally, these definitions are ambiguous and subject to the discretion of each company.  

The particular details that the Authority considers are important for disclosure in the report of Board of Directors' of the holding company are as follows: the flow of resources within the group; explanations of developments in paragraphs of the financial statements; strategy.  

With respect to the flow of resources, the holding company should describe the relationship between it and the companies held by it. Also, since the ability to service the debt and the distribution of the profits of the holding company often rely on the cash flow of the companies held by it, it is necessary to disclose the flow of liquid resources in the holding company –of liquid resources, financial debt and the movements in the same, in order to enable investors to identity the location of the debts of the group  as well as the sources for servicing them and the possibilities and restrictions of using such sources freely.  

As part of the developments in the paragraphs of the financial statements, the holding company should analyze its individual statements in addition to a separate analysis of each of the operating segments, in such a manner which will enable the investors to understand the source of profits of the company. To that end, the analysis should provide an analysis of the results of the company's activities broken down into the following items: results of the companies held by it; results which are derived from the activities of company headquarters; results which are derived from special events connected with investment in the companies held by the holding company.  

Within the description of strategy, the holding company should detail not only the strategy of the companies held by it but also the strategy of the holding company itself.  Subject which are likely to be relevant in this respect include: investment strategy in the companies held by it; those sectors in which the company invests and the criteria for investment in new sectors; the interaction between the various investments of the company; its leveraging policy in the funding which it makes available to the companies held by it and its policy concerning its involvement in the ongoing management of the companies held by it.    

Reference: Legal Position 105-31 of the Securities Authority "Clarifications concerning required disclosure from Holding Companies" December 2015