In China's current company law, there is no concept of parent company, but there are principles for branches and subsidiaries.
Article 14 of the Company Law of People's Republic of China (PRC) stipulates:
"The company can set up a branch. The establishment of a branch company shall apply to the company registration authority for registration and obtain a business license. A branch company does not have legal person status, and its civil liability shall be borne by the company. A company may set up subsidiaries, which have legal personality and independently bear civil liabilities according to law.
A subsidiary is an independent legal person. From a legal point of view, it has both independent operational autonomy and independent financial autonomy, but it cannot be separated from the unified strategic planning of the parent company.
Subordinate units (such as subsidiaries of the head office) are not independent legal persons and do not have legal personality. They are only branches or agencies of the head office in production or operation. Even if they can carry out independent accounting and even have internal legal personality, they can't sign contracts and take risks.
The relationship between the branch and the head office:
1. concept
The head office manages its branches and has the right to exercise command, management and supervision over the production and operation, capital allocation and personnel management of its subsidiaries. It is qualified as a legal person and can independently bear civil liabilities. Branch is a legal concept corresponding to the head office, which refers to a branch that is managed by the head office in terms of business, funds and personnel and does not have legal person status. The branch is not independent in law and economy, and belongs to the subsidiary of the head office.
2. Contact and difference
(1) The branch does not have its own independent property, and the property actually occupied and used is part of the property of the head office and listed in the balance sheet of the head office.
(2) The branch does not have the legal person qualification and does not bear civil liability independently.
(3) The establishment procedure of a branch is different from that of a company in the general sense, and the establishment of a branch only requires simple registration and business opening procedures.
(4) The branch does not have its own articles of association, and there is no corporate management decision-making body such as the board of directors.
(5) The name of the branch company is the name of the head office plus the words of the company. Although the name has the word company, it is not a real company.
Relationship between branches and subsidiaries:
Subsidiaries and branches are important business organization forms of modern large companies, with professional qualifications and their own office space. However, there are essential differences between the two.
1. Their legal status is different.
The subsidiary has independent subject qualification and enjoys independent legal person status. Branches do not have independent civil and commercial subject qualifications and legal person qualifications.
A subsidiary is an independent legal person with its own independent name, articles of association and organizational structure. Conduct activities in its own name, and the creditor's rights and debts incurred in the course of operation shall be borne independently by itself.
The branch does not have the qualification of enterprise legal person and has no independent name. Its name should be preceded by the name of the head office, which is established according to law and is only a branch of the company.
Therefore, the subsidiary, as an independent legal person, has an independent will in law, and the parent company cannot directly direct and direct the operation and management activities of the subsidiary. As a branch of the company, the branch is completely controlled by the company in business execution and fund allocation.
2. Their names are different.
Branches have no independent names, and subsidiaries have their own independent names. The name of the branch company needs to be added with the name of the parent company; A subsidiary can name itself without adding the name of the parent company.
Although the name of a branch has the word company, it is not a real company. There is no difference between a subsidiary and a head office. The parent company holds the shares of the branch company, which is more related to the interests.
Their business scope is different.
The business scope of a branch company shall not exceed the business scope of the parent company, and subsidiaries can choose their own business scope, which is generally unrestricted.
4. Their establishment procedures are different.
The procedure of establishing a branch is different from that of a company in general. To set up a branch, you only need to go through simple registration and opening procedures. Subsidiaries need to apply and set up in accordance with normal regulations.
The subsidiary is established by the shareholders of the company in accordance with the provisions of the Company Law, and meets the requirements of the Company Law on the conditions for the establishment of the company and the mode of capital contribution. The head office applies to the local industrial and commercial authorities outside its domicile for the establishment of a branch office, which belongs to the establishment of a branch office.
Their property relations are different.
In the structure of property relationship, although the subsidiary has the participation of the parent company, it still owns its own property. The property of the branch company belongs to the company and is an inseparable part of the company's property.
The branch company does not have its own independent property, and the property it actually occupies and uses is part of the property of the head office and listed in the balance sheet of the head office. The property of the subsidiary is independent and has nothing to do with the property of the head office. In addition, the transfer of funds between the branch and the head office does not involve any change of ownership, so there is no need to pay taxes.
6. The control relationship with the parent company is different.
The parent company's control over its subsidiaries must meet certain legal conditions. Generally, the parent company does not directly control its subsidiaries, but more indirectly controls them, that is, it affects the production and operation decisions of subsidiaries by appointing and dismissing board members and making investment decisions.
However, branch offices are different. Its personnel, business and property are directly controlled by the head office and engaged in business activities within the business scope of the head office.
7. They have different ways of assuming debt responsibilities.
A branch company does not have the qualification of an enterprise legal person and cannot bear civil liability independently, and its civil liability shall be borne by the company that established the branch company.
Subsidiaries have independent corporate qualifications and can independently bear civil liabilities according to law. The parent company is not responsible for the debts of its subsidiaries.
As the largest shareholder of the subsidiary, the parent company is only responsible for the debts in the operating activities of the subsidiary to the extent of its capital contribution to the subsidiary; As an independent legal person, subsidiaries are liable for operating liabilities with all their property.
Since the branch company does not have its own independent property, it conducts economic accounting with the head office, so the liabilities in its business activities are paid off by the head office, that is, the head office is responsible for the debts in the operation of the branch company to the extent of all its assets.
8. The tax relationship between them is different.
There is a big difference between setting up a branch and setting up a subsidiary through holding. Because the branch is not an independent legal person, its profits and losses should be combined with the head office to calculate and pay taxes, while the subsidiary is an independent legal person, and the parent and subsidiary companies should pay taxes separately. The subsidiary can only distribute dividends according to the shares held by shareholders in the after-tax profits.
The tax preferences of subsidiaries and branches are quite different. Generally speaking, the most important difference between the two organizational forms is that the subsidiary is an independent legal entity, which is regarded as a resident taxpayer in the country where it is established and usually bears the same comprehensive tax obligations as other companies in that country.
Branches are not independent legal persons, and are regarded as non-resident taxpayer in the country where they are established, and they only bear limited tax obligations. The profit and loss of the branch company should be merged with the head office, that is, the "consolidated statement".
China's tax law also stipulates that there are two forms of income paid by subsidiaries of the company: one is to declare and pay taxes independently; First, it is merged into the head office to collect taxes.
The form of tax payment depends on the nature of the company's branches-whether they are independent taxpayers of enterprise income tax. It should be pointed out that the profits of overseas branches and head offices are calculated on a consolidated basis.
What is affected is the tax burden of the country of residence. As for the host country where the branch is located, it is often necessary to tax the income belonging to the branch itself, which is the so-called income source tax jurisdiction. However, the establishment of domestic branches does not exist this problem, and enterprises should pay attention to this point in tax planning.
9. The business license obtained is different.
The subsidiary receives the Business License of Enterprise as a Legal Person with the name of the legal representative. The branch company obtains a business license with the words "person in charge" on it.
10. The product packaging labels are different.
A subsidiary must indicate its name and domicile on the outer packaging of its products. A branch company may indicate its own name and domicile, or indicate the name and domicile of the head office at the same time, or only the name and domicile of the head office.
Extended data:
Main features:
1. The branch is established by the head office according to law, and the main business activities of the branch are completely decided by the head office. Under normal circumstances, branches carry out business activities in the name of the head office and according to the entrustment of the head office.
2. The branch does not have its own independent property, and all the assets of the branch belong to the head office. The branch and the head office are unified in economic accounting, and the property actually occupied and used by them is part of the property of the head office and included in the balance sheet of the head office.
3. A branch is not a company, and its establishment does not need to follow the company establishment procedures, as long as it performs simple registration and industrial and commercial procedures.
4. Branches do not bear civil liabilities independently, and there is no corporate decision-making and business executive body in the form of board of directors. The head office shall bear unlimited liability for the debts of its branches.
The branch company does not have its own independent name and articles of association, and can only use the same name and articles of association as the head office.
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