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.
(2) The relationship between parent company and subsidiary company is based on the agreement of share possession or control.
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.
(3) The parent company and subsidiaries are independent legal persons.
Although subsidiaries are actually controlled by the parent company, restricted and managed by the parent company in many aspects, and some of them are actually similar to the branches of the parent company, legally speaking, subsidiaries belong to independent legal persons, engage in business activities in their own names and independently bear civil liabilities.
Legal basis: Branch companies can be established in Article 14 of People's Republic of China (PRC) Company Law. 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.