A company that owns (holds) the assets of another company but operates as a distinct and usually autonomous corporate entity, complete with its own board of directors.

The establishment of a holding company can be a useful strategy for large corporations that find themselves in conflict with a marketplace governed by new regulations. If such a company is structured properly, the corporation can retain ownership of two or more subsidiaries or affiliate companies that would otherwise have to be divested to avoid regulatory conflicts. Owners of a holding company can still exert influence over that company, but the risk of this occurring is vastly reduced by the fact that the holding company will normally have its own ideas about how it should operate, and is entitled to do business as it sees fit.

Holding companies are relatively common in newly deregulated markets of all types. New regulations in the energy industry, designed in part to stimulate competition for energy services, have forced many vertically integrated utilities to restructure themselves or sell off assets, and many of these utilities have chosen to set up holding companies in regions where regulators have allowed them to do so.

Because abuses of the system are still possible under a holding company structure, the Public Utility Holding Company Act was instituted in 1935 to prevent abusive management practices from adversely affecting energy consumers. Among other things, this act prohibits holding companies from participating in other utility businesses (e.g. telephone, waste removal) and places all transactions of such companies under the watchful eye of the US Federal Energy Regulatory Commission.

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