Although there is actually a control relationship between the parent company and its subsidiaries, they are legally qualified as legal persons and independently bear civil liability according to law. The parent company and its subsidiaries have independent legal person qualifications, and the qualifications of the parent company are not applicable to the subsidiaries and cannot be used.
The differences between subsidiaries and parent companies are mainly reflected in the following aspects:
1. Concept: A parent company refers to a company that owns more than a certain proportion of shares in another company or can actually control another company through an agreement. Having the qualification of a legal person and being able to bear civil liability independently. Subsidiary is a legal concept corresponding to the parent company, which refers to a company whose shares are held by another company or actually controlled by another company through an agreement. A subsidiary company has the status of a legal person and can bear civil liability independently.
2. Control relationship: The subsidiary is actually controlled by the parent company. The parent company has the actual decision-making power on major issues of its subsidiaries, can decide the composition of the board of directors of its subsidiaries, and can directly exercise the power to appoint directors of the board of directors.
3. Equity relationship: The relationship between the parent company and its subsidiaries is based on the agreement on the possession or control of shares. Generally speaking, shareholders with more shares have greater decision-making power over company affairs. Therefore, if a company owns more than 50% of the shares of another company, it can actually control the company. In practice, the shares of most companies are scattered, and as long as they have more than a certain proportion of shares, they can obtain a controlling position. In addition to controlling shares, a company can also control another company by concluding some special contracts or agreements.
4. Operation and management: the subsidiaries are relatively independent in economy and independent in property from the parent company. The reporting of enterprise results by subsidiaries to the parent company is limited to production and operation activities. The economic status and legal status of subsidiaries are independent, so subsidiaries will not be directly affected by the cancellation or dissolution of parent companies due to legal, economic or investor investment strategies. The operation and management of subsidiaries are independent, and the influence of parent company is limited to the influence of major shareholders on the company itself.
5. Taxation: The subsidiary is an independent legal person, and the income tax is levied independently. At the same time, subsidiaries enjoy local tax holidays, preferential policies and other preferential policies. It is much more flexible to remit the profits of subsidiaries to the parent company than to the parent company, which means that the investment income and capital gains of the parent company can stay in the subsidiaries or be remitted when the tax burden is light, thus obtaining additional taxes and benefits.
To sum up, there are significant differences between subsidiaries and parent companies in concept, control relationship, equity relationship, management and taxation.
Legal basis:
Company Law of the People's Republic of China
Article 14
Companies can set up branches. 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.