What is a holding Company

[Chicken #16]

I'm trying to work out the benefits of holding companies.

My understanding is very limited but it seems someone might set up a business selling goods, they then transfer the shares in that business to a holding company which is then owned in shares by the person who set it up.

Can someone give me a nice easy explanation. Wikipedia was rubbish and google has been less than helpful (I didn't quite understand the benefits)

 

[Chicken #16]

Laymens terms:


The purpose of this is that if something really bad happens, the holding company can go bust, all debts will be written off (as the holding company is a .ltd standing for 'limited liability') and just sell the company it holds to another holding company for £1.

So I have a construction business with debts of a million but looks like it could recover, my holding company declares bankruptcy and the debts are wiped and I sell my business with no debts to my other holding company for £1? Is this right? That would be quite a big advantage to a holding company.

You say the courts now overrule this....how long have they not? It sounds like a massive and obvious loophole someone left open for their own advantage.