# Subsidiary referral approval: the escalation tree | SourceX

Canonical: https://refer.sourcex.si/guides/why-a-subsidiary-introduction-needs-a-different-approval-path
Last updated: 2026-10-26

A subsidiary introduction needs a different approval path because three things that sit together in a standalone company come apart inside a group: the legal entity that holds the records, the parent that controls it, and the CEO who authorizes a licensing discussion. The executive you know may run the business day to day without being that CEO. Before anyone is asked, settle four questions in order: which entity holds the records, whether it has its own CEO, whether the parent holds the systems or contracts, and whether the entity passes the fit facts on its own.

Funding status does not enter into it. Whether your fund owns the parent, a sister company or nothing at all, the subsidiary faces the same tests, and the fund's control of a parent never makes the fund the decision-maker.

## What changes when the company sits inside a group

The questions that decide who gets asked have different answers once a parent is involved.

| Question | Standalone company | Subsidiary |
|---|---|---|
| Who you usually know | The CEO or founder | A division president, general manager or the founder who sold to the group |
| Who authorizes a licensing discussion | The CEO | The subsidiary's CEO, or where it has none, the CEO of the nearest parent entity that runs it |
| Where the records live | The company's own systems | Its own systems, the parent's tenant or a shared-services platform |
| Who signed the contracts that govern the records | The company | The company, the parent on the group's behalf, or both |
| Whose fit facts count | The company's | The entity that would license, assessed on its own staff, records and rights |
| Reward cap | $100,000 for the company | One $100,000 cap shared by the parent and every subsidiary |

The reward row is settled policy, and the [group reward cap page](/guides/subsidiary-referral-reward-cap) walks through the arithmetic. The rest of this page is about the rows above it.

For a portfolio operations director, the common version is an add-on: a business bought by a platform company and kept as its own legal entity. Its founder may still run it as president while the platform CEO runs the group, and the founder is the person the operating team talks to every week.

## Which entity holds the records, and who controls it today?

Start with the legal entity, not the brand. Name the entity whose employees created the records and whose systems hold them. A division or business unit with no separate legal entity cannot contract on its own, so the parent entity is the company for every test.

Then name the controller, with a date. The SEC's Regulation S-X offers useful vocabulary: control is the power, direct or indirect, to direct or cause the direction of a company's management and policies, through voting shares, by contract or otherwise, and a majority-owned subsidiary is one whose parent group holds more than 50% of its voting shares. Use those words to write the note, not to make a legal determination; that is for SourceX's review and the company's advisers.

A dated ownership line reads like this (Illustrative): "Majority-owned by the platform company since the add-on closed in March 2024, per the fund's portfolio records, checked 26 October 2026." Ownership moves with every add-on, carve-out and recapitalization, so an undated line is a guess. If the group is weighing a sale or wind-down of the subsidiary, the order of those decisions is covered in [selling, winding down or licensing alongside](/compare/sell-us-subsidiary-or-wind-down).

## The subsidiary authority escalation tree

Four questions, asked in order. Each answer either names the next person or stops the row. The graphic above shows the same tree.

| Step | Question | If yes | If no | Write down, with a date |
|---|---|---|---|---|
| 1 | Is the business its own legal entity? | Go to step 2 | It is a division: the parent entity is the company and its CEO authorizes | Entity name and where you confirmed it |
| 2 | Does that entity have its own CEO? | The subsidiary CEO authorizes | The CEO of the nearest parent entity that runs it authorizes, usually the platform or group CEO; the subsidiary's leader becomes the internal sponsor | Authorizer's name and title |
| 3 | Do the parent's systems or contracts hold the records? | Flag it for SourceX's rights review; expect the CEO to involve group IT or legal for exports | Note "own systems, own contracts" | Which systems, on whose tenant; who signed the main customer contracts |
| 4 | Does the entity pass the published fit facts on its own? | Introduce through the person who owns the CEO relationship | Unknown: ask metadata questions through the sponsor. Fails: do not introduce | Headcount at peak, years of records, rights notes, location |

**Why step 2 matters most.** A subsidiary president or general manager can describe the records and carry the case upstairs, but unless the entity has its own CEO, that person is the sponsor, not the authorizer. Skipping the authorizer is the classic failure: the group CEO hears about it secondhand.

**Three people instead of one.** A subsidiary introduction usually involves the executive you know (the sponsor), the person who owns the relationship with the authorizing CEO, often the deal partner or board member rather than the operating team, and the CEO. The [map of data owners, sponsors and gatekeepers](/guides/an-operating-partner-s-map-of-data-owners-and-gatekeepers) helps when more than one person claims that relationship.

**Step 3 is a flag, not a verdict.** Hosting does not settle ownership, but intercompany agreements, group IT terms and customer contracts can narrow what a subsidiary may license, as the [shared group system page](/questions/who-owns-data-in-a-shared-group-system) explains. Record where the records sit, at metadata level, and pass the flag on.

## Program, language and history tests applied to a subsidiary

**Mandate.** SourceX applies the criteria of the specific program rather than one universal minimum: programs differ in size, history, geography, language and data category, and some set higher thresholds. A subsidiary that passes the published baseline has earned an introduction, not a decision, and one that does not fit one program may fit another later.

**Language and geography.** Companies in the U.S., Canada and the EU qualify, as do companies in the UK, Australia, New Zealand, India, Singapore, South Africa, Latin America, the UAE and Saudi Arabia when at least 90% of the data is in English. Apply the test to the entity that would license and to the records it would offer, not to the parent: a U.S. group's subsidiary in India meets the location test only with a 90% English share in the offered records, which is measured on the records themselves.

**History.** An add-on's records often predate its acquisition. Whether those older records came with the business depends on how the deal was structured, which the [asset versus stock purchase page](/questions/asset-purchase-vs-stock-purchase-records-ownership) explains. Note the acquisition date beside the span of years, so the reviewer can see which records were created under which owner.

**Headcount.** Count the licensing entity's full-time employees at peak, contractors excluded. If the case only works with the parent's staff counted, say so plainly in the introduction.

## Three subsidiaries through the tree (Illustrative)

Illustrative. Generic companies, invented facts, no outcomes implied.

**A. An add-on run by its founder.** A 180-person commercial HVAC services company, bought by a fund's platform company two years ago, remains its own legal entity with its founder as president and no CEO of its own. Twelve years of work orders sit in its own field-service system, with a group ERP migration scheduled. Step 2 makes the platform CEO the authorizer and the founder the sponsor; the board member who owns the platform CEO relationship makes the ask.

**B. A U.S. subsidiary of a foreign parent.** A 260-person U.S. distribution subsidiary has its own CEO, but its email and CRM run on the parent's tenant and the parent signed its largest customer contracts. The subsidiary CEO authorizes; step 3 raises a rights flag, written into the introduction, and the subsidiary CEO brings in group IT for any export.

**C. A captive shared-services unit (rejected).** A 38-person subsidiary processes claims files for the insurance clients of its sister companies. It fails step 4 twice: it has never had 50 full-time employees, and the files belong to the sister companies' clients, which the published screening criteria list as usually not a fit, alongside data the company does not control. Decision: do not introduce; no partner action changes who owns those files. The parent's own records would be a separate row, starting at step 1.

## Parked, excluded and unfinished rows: what to say and what to record

Most subsidiary rows end the first pass unfinished: a controller nobody can date, a CEO nobody can name, a headcount that might include the parent's staff. Park each with the one question that would move it, asked through the sponsor and kept descriptive. Partners never ask for files, samples or logins, and the words used with the sponsor and the CEO matter as much as the tree.

| Say | Avoid |
|---|---|
| "SourceX reviews fit, rights and current demand. Nothing is decided by this conversation." | "You qualify." |
| "The CEO decides whether to talk. I only make the introduction." | "The group has signed off on this." |
| "Records the parent or your clients control may stay outside any license." | "All of your data can be licensed." |
| "I may receive a referral reward, paid separately by SourceX and never deducted from your payout." | Leaving the reward unmentioned |

Excluded rows get the failing fact written down and are closed. Do not re-present an excluded subsidiary as its parent unless the parent passes the tree on its own. When several entities in one group may qualify, one partner is credited per company and the group shares one cap; the [several companies from one group page](/questions/can-i-introduce-several-companies-from-the-same-corporate-group) covers how that works. If the parent is listed, expect disclosure counsel to join early, as the [listed-group subsidiary page](/questions/can-subsidiary-public-company-license-data) explains.

## Where this tree can mislead

- **Stale ownership.** Add-ons, carve-outs and recapitalizations change the controller and sometimes the CEO. A tree run on last year's facts names the wrong authorizer.
- **Rights inside the group.** Shared systems, intercompany agreements and parent-signed customer contracts can narrow what a subsidiary may license. Step 3 flags the question; only SourceX's rights review answers it.
- **Demand.** SourceX checks relevance to its current data needs in review, and the criteria differ by program. A subsidiary that clears all four steps can still be declined today.
- **Group politics.** A parent may prefer that subsidiaries do not discuss licensing separately, and asking a platform CEO spends relationship capital. No data on how groups respond has been published.

**Methods note.** The tree was built on 26 October 2026 from SourceX's published screening criteria and program terms (Version 2026-10-22.2), the owner's decisions that the CEO authorizes and that a parent and its subsidiaries share one reward cap, and Regulation S-X's definitions of control and majority-owned subsidiary as vocabulary. It does not measure demand, record quality or payouts. How often subsidiary introductions stop at each step has not been measured, and no figures are published; to test the tree, run your next ten subsidiary rows through it and count where each stops.

## Next step

> **Refer a company. Earn up to $100,000.** Default reward: 25% of Actual Supplier Payout, capped at $100,000 cumulatively per referred company. Eligibility and payment conditions apply, and a signed Schedule A or addendum can differ. A lead, meeting or signature alone does not trigger payment.

When a subsidiary row reaches step 4 with a named authorizing CEO and a relationship owner who has agreed to ask, [register for a partner link](/register), check the entity against [who qualifies](/who-qualifies) and read the [program terms](/terms); whoever submits signs the SourceX Channel Partner Agreement first. More introduction guides sit in the [guides hub](/guides).

If you are looking at SourceX as a possible investment rather than as a referral channel, that is a separate decision: the [SourceX investor overview](https://sourcex.si/investors) is where to request investor materials, including the company and commercial metrics SourceX shares with investors directly.

This article is for information only and is not an offer to sell or a solicitation of an offer to buy securities. Any offering by SourceX is made only to verified accredited investors through its offering documents.

## Sources

- https://refer.sourcex.si/terms
- https://refer.sourcex.si/who-qualifies
- https://www.ecfr.gov/current/title-17/chapter-II/part-210/subject-group-ECFR8bf2a0f20b6a007/section-210.1-02
- https://sourcex.si/investors