Although the subsidiary is under the actual control of the parent company, it is restricted and managed by the parent company in many aspects, but it is an independent legal person in law, engaged in business activities in its own name and independently bears civil liability. Subsidiaries have their own articles of association, board of directors and other corporate decision-making bodies. Subsidiaries have independent property and balance sheets.
The subsidiary and the parent company shall bear their own responsibilities to the extent of their own property, and are not related to each other. As the largest shareholder of the subsidiary, the parent company is only liable to the subsidiary for its capital contribution. To set up a subsidiary, an application must be made in strict accordance with the requirements for setting up a company, and business can be started only after obtaining a business license and going through relevant formalities according to law.
3. Different status
Companies can be divided into parent companies and subsidiaries according to their different positions in the relationship between control and controlled. The company that actually controls other companies is the parent company, and the company that is actually controlled by other companies is the subsidiary company.
The parent company has the actual decision-making power on major issues of its subsidiaries, can decide the composition of the board of directors of its subsidiaries, and can directly exercise the power to appoint directors of the board of directors. The business activities of subsidiaries should also be controlled by the parent company and obey the needs of the overall strategy and interests of the parent company. However, this control is indirect and positively related to the proportion of equity owned by the parent company.