Alphabet Wraps Up Reorganization With a New Company Called XXVI (bloomberg.com)

Alphabet is approaching its final form. After evolving from Google into a corporate parent with distinct arms in far-flung fields like health care and self-driving cars, it is now forming a new holding company called XXVI Holdings Inc. Bloomberg reports: The new structure legally separates Google from other units such as Waymo, its self-driving car business, and Verily, a medical device and health data firm. Google co-founder Larry Page announced Alphabet two years ago to foster new businesses that operate independently from Google. Technically, however, those units, called the "Other Bets," were still subsidiaries of Google. The new structure, unveiled Friday, enables the Other Bets to become subsidiaries of Alphabet on the same legal footing as Google. "We're updating our corporate structure to implement the changes we announced with the creation of Alphabet in 2015," Gina Weakley Johnson, an Alphabet spokeswoman, said. She called the process a legal formality that won't affect ultimate shareholder control, operations, management or personnel at the 75,606 person company. Google is also changing from a corporation to a limited liability company, or LLC. This won't alter the way the business pays taxes, Johnson said. The switch is partly related to Google's transformation from a listed public company into a business owned by a holding company. Now, it's owned by Alphabet, so it effectively has only one investor and no public disclosure obligations. An LLC structure is better suited to this situation. XXVI, the name of the new holding entity, is the number of letters in the alphabet expressed in Roman numerals.

Comments

Re:why

[swillden]

Most of the purpose of having a corporation is to ensure that if it goes bankrupt it doesn't take the owners down with it. While it's unlikely that any of the "other bets" could generate such a large financial liability that it could actually sink Google, they might be able to put a dent in it. By separating the companies entirely, Alphabet enables any one of the subsidiaries to go belly up without harming the rest. Of course, they'll still have the option of using cash generated by Google to bail out failing subsidiaries if they want. Or to grow succeeding subsidiaries. Larry and Sergey being who they are, I doubt they'd use bankruptcy to avoid legitimate liability, but the change should serve to make shareholders a lot more comfortable with the other bets, knowing that any of them can be shut down cleanly at any time.

Is it to limit legal liability when one of these firms does something hugely illegal?

I don't think that actually works. When courts are pursuing criminal wrongdoing, they look for actual decisionmakers, regardless of corporate boundaries. Otherwise it would be trivial for corporations to deliberately set out to do illegal things, isolating the illegal acts in a subsidiary set up for that purpose, then just cutting it loose if it gets caught. For example, VW could have set up a subsidiary responsible for writing the emissions control software for their diesel vehicles.