1. Branches refer to branches under the jurisdiction of the company, as well as organizations established by the company outside its domicile to engage in activities in its own name. The branch company does not have the qualification of enterprise legal person, and its civil liability shall be borne by the head office. Although there is the word company, it is not a real company and has no articles of association. The company name can only add the word "branch" after the name of the head office.
2. A subsidiary refers to a company that is controlled by another company or actually controls and dominates a certain number of shares by another company according to an agreement. A subsidiary owns all its own property, has its own company name, articles of association and board of directors, conducts business activities and various civil activities in its own name, and independently bears all the consequences and responsibilities brought about by the company's actions.
2. What's the difference between a branch and a subsidiary?
1. Different building methods
A subsidiary is generally established by two or more shareholders, including the company, in accordance with the provisions of the company law. Registration shall comply with the provisions of the Company Law on the conditions for establishment and the mode of capital contribution, and obtain the Business License of Enterprise as a Legal Person from the industrial and commercial department. The name of a subsidiary is generally a limited liability company or a joint stock limited company.
When a company establishes a branch, the head office generally applies to the local industrial and commercial authorities outside its domicile to obtain a business license. The names of branches are all branches in the end.
2. Different legal status
A subsidiary has the status of a legal person, has an independent name, articles of association and organization, engages in business activities in its own name, can independently carry out various business activities and engage in various civil activities within its own business scope, and independently bear all consequences and responsibilities brought about by the company's actions. However, major decisions or major personnel arrangements involving the interests of the company must still be decided by the parent company.
The branch company was established by the head office at the request of the local industrial and commercial departments outside the domicile. It belongs to the branch of the head office and has no legal personality, independent name, articles of association and organization. Although business activities can be carried out independently, they must be carried out in the name of the branch of the head office and only within the scope authorized by the head office.
3. Different control methods
Generally speaking, the parent company does not directly control its subsidiaries, but mostly adopts indirect control, that is, it affects the production and business activities of subsidiaries through investment decisions and the appointment and dismissal of board members of subsidiaries.
Branches are not. Their property, business and personnel are directly controlled by the head office and can only engage in business activities within the business scope of the head office.
There are different ways to assume debt responsibility.
A subsidiary has the status of a legal person and is liable for the debts arising from its business activities with all its property.
Not only does the branch company have no independent property, but it also has to do unified financial accounting with the head office. The head office must pay off the debts incurred by the branch company in its business activities with all its property.
5. The legal effect in litigation is different.
The basic spirit of China's legal person system is that the legal person only bears civil liability with its own property, the factor company is an independent legal person, and the subsidiary only bears civil liability with its own assets. Except for the investors (i.e. shareholders of subsidiaries) who make false capital contributions or withdraw funds after making capital contributions, some investors who can't pay off need not bear it alone.
When a branch company is not an independent legal person and fails to perform its debts in the course of business development, the creditor may demand the head office to bear the repayment obligation, or directly take the head office as the defendant and demand it to bear the responsibility in the lawsuit.