1. Can a subsidiary be changed into a branch?
Changing a wholly-owned subsidiary into a branch company can generally be handled by absorption and merger. If it is not a wholly-owned subsidiary, it should first acquire a minority stake and become a wholly-owned subsidiary, and then absorb the merger.
The parent company's absorption and merger of wholly-owned subsidiaries is equivalent to the cancellation of wholly-owned subsidiaries, and all its assets, liabilities, business and personnel are transferred to the parent company. The general practice is to transfer all the assets and liabilities of subsidiaries to the parent company (the transfer of liabilities needs to go through the formalities of notifying creditors according to law), and then cancel the subsidiaries that have become empty shells. Accounting treatment is the recovery of investment. This way can maintain the continuity of the production and operation activities of subsidiaries, and is not restricted by the general enterprise's "no production and operation activities unrelated to liquidation during liquidation".
Because there are other shareholders in the non-wholly-owned subsidiary, it is necessary to acquire minority shares and become a wholly-owned subsidiary of a single shareholder before the merger operation can be carried out. It can also be agreed that the minority shareholders of the subsidiary will exchange their minority shareholders' shares of the subsidiary for the additional shares of the parent company, but the specific operation is also divided into two steps: the first step is to exchange shares, and the subsidiary will become a wholly-owned subsidiary and the minority shareholders will become shareholders of the parent company; In the second step, the parent company absorbs and merges the subsidiaries that have become wholly-owned subsidiaries.
Second, the main differences between branches and subsidiaries
According to the Company Law, a company can set up branches, which do not have the qualification of enterprise legal person, and their civil liabilities shall be borne by the company. A company may establish subsidiaries, which have the status of enterprise legal persons and independently bear civil liabilities according to law.
The differences between subsidiaries and branches are as follows:
(1) The subsidiary is an independent legal person with its own name, articles of association and organization, and conducts activities in its own name. 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 affiliated company, which is established according to law and is only a branch of the company.
(2) 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 affiliated companies and engaged in business activities within the business scope of affiliated companies.
(3) Different ways to assume debts. 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. Because the branch company does not have its own independent property, it is accounted for together with the affiliated company economically, so the liabilities in its business activities are paid off by the affiliated company, that is, the affiliated company is liable for the debts in the operation of the branch company to the extent of all its assets.