A: Some company law experts in China define affiliated companies as: affiliated companies refer to alliances formed by specific means between enterprises to achieve specific economic goals. The "specific economic purpose" here refers to the control relationship or unified arrangement relationship formed between enterprises in pursuit of greater scale benefits; "Specific means" refers to equity participation or capital penetration, contractual mechanism or other means, such as personnel interlocking or voting rights agreement; "Inter-enterprise consortium" refers to the consortium between companies and enterprises with independent legal personality.
The manifestations of affiliated companies mainly include parent companies and subsidiaries, leading companies and subordinate companies, holding companies, holding companies, corporate groups and multinational companies. A subsidiary refers to a company whose shares are owned by another company or actually controlled by another company through an agreement. A subsidiary has the qualification of an enterprise legal person and independently bears civil liability according to law.
What's the difference between a branch and a subsidiary?
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 independent name, articles of association and organization. Carry out external activities in its own name, and bear the creditor's rights and debts incurred in the course of operation independently.
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 its subordinate 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's control over subsidiaries is not direct control, but more indirect control, that is, it affects the production and operation decisions of subsidiaries through the appointment and removal of board members and investment decisions.
The branch company is directly controlled by the subordinate company and engaged in business activities within its business scope.
(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 to the extent of 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.