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.
Legal basis: People's Republic of China (PRC) Company Law.
Article 174 When a company is merged, the creditor's rights and debts of the merging parties shall be inherited by the surviving company or the newly established company after the merger. Article 175 When a company is divided, its property shall be divided accordingly. When the company is divided, it shall prepare a balance sheet and a list of assets. The company shall notify the creditors within 10 days from the date of making the resolution of separation, and make an announcement in the newspaper within 30 days. Article 176 The debts of the company before division shall be jointly and severally liable by the company after division. However, unless the company and creditors reach a written agreement on debt settlement before division. Article 177 When a company needs to reduce its registered capital, it must prepare a balance sheet and a list of assets. The company shall notify the creditors within ten days from the date of making the resolution to reduce the registered capital, and make an announcement in the newspaper within thirty days. Creditors have the right to require the company to pay off debts or provide corresponding guarantees within 30 days from the date of receiving the notice, or within 45 days from the date of announcement if they have not received the notice. Article 178 When a limited liability company increases its registered capital, the contribution of the newly-increased capital subscribed by shareholders shall be implemented in accordance with the relevant provisions of this Law on the contribution of limited liability companies. When a joint stock limited company issues new shares to increase its registered capital, shareholders shall subscribe for new shares in accordance with the relevant provisions of this Law on the establishment of a joint stock limited company and the payment of shares. Article 179 Where a company is merged or divided and its registered items change, it shall register the change with the company registration authority according to law; If the company is dissolved, it shall go through the cancellation of registration according to law; Where a new company is established, it shall be registered in accordance with the law.