The concept " subsidiary"was introduced into the Civil Code of the Russian Federation in 1995. Since then legal status this market entity was regulated by Art. 105 Civil Code RF. Changes were adopted in 2014. Today legal status of these organizations is determined by Art. 67.3 Civil Code of the Russian Federation.

Peculiarities

The organization will be recognized subsidiary, if another partnership or company has the right to determine the decisions that are made by such company. This connection is based on one of the following circumstances:

• predominant participation in authorized capital;
• on the basis of the concluded agreement;
• in any other legal manner (this provision is contained in the charter subsidiary company, representatives of the main company are included in the participants, etc.).

The legislator determined these conditions in general view. For example, it did not approve the minimum size of the share that the main company must have in the capital of the subsidiary.

The peculiarity of this type of organization is that they can exist in any organizational and legal form, for example, LLC, JSC, etc.

The specificity lies in the special relationship with the main societies, which is sometimes called maternal. For example, they can influence the actions of subsidiaries.

Specially regulated material liability:

• the subsidiary is not liable for the debts of the parent company;
• the subsidiary and main organizations are jointly and severally liable for debts incurred under a transaction concluded as a result of a decision made by the parent company;
• the main company will be held vicariously liable if its actions or decisions led to the insolvency of the subsidiary.

These rules are enshrined in Art. 67.3 of the Civil Code of the Russian Federation.

Opportunities and responsibilities

A subsidiary is an organization that has its own capital and property. It concludes contracts and performs other functions as a full-fledged market participant.

In accordance with the Civil Code of the Russian Federation, a subsidiary is not liable for the debt of the parent company. She, in turn, can be brought to subsidiary or joint liability in certain cases. For example, losses in a transaction entered into at the initiative of the parent company are reimbursed by either the parent or subsidiary.

In this case, they are jointly and severally liable. It is described in more detail in Art. 322 Civil Code of the Russian Federation. In case of joint liability the creditor can demand fulfillment of obligations from all debtors jointly or from any of them separately. If one organization does not implement them, then he can turn to another.

Vicarious liability of the parent organization occurs if its actions and decisions led to the insolvency of the subsidiary. According to Art. 399 of the Civil Code of the Russian Federation in such a situation stands out principal debtor. Requirements are made to him first of all. The main company must repay that share of the subsidiary's debt that it is not able to cover from its property.

Influence of the parent company

The main feature of a subsidiary is that its decisions may be influenced by another organization. Such relationships are allowed for various reasons.

The parent company does not always have a dominant share in the authorized capital of the subsidiary.

Such relationships may have contractual nature. For example, a controlled company receives the right to use technology to produce a certain object, but sales of the product must be agreed upon with the main company.

A subordination clause may be included in the charter of a subsidiary. Similar companies have their own controls, which means control must have a certain consolidation. The charter may stipulate what types and amounts of transactions must be carried out with the approval of the board of directors or general meeting.

Thanks to this, the parent organization will not take part in operational management, but will be able to influence when making strategically important decisions. This rule is relevant for main companies that have several subordinate companies.

Opening procedure and methods

The creation of a subsidiary organization can be done in two ways. First - by registering a new company or partnership. In such a situation, it is carried out standard procedure, which includes next steps:

• making a decision to create a new market entity, drawing up the verdict in paper form (protocol);
• preparing documents for registration, filling out an application, drawing up a charter;
• transfer to the tax office for registration of a new company;
• rendering a verdict by the registration authority.

If the decision is positive, the subsidiary can begin its activities, and if the decision is negative, it can file a complaint against the decision of the tax inspectorate for illegal refusal.

The second way is "absorption". This happens when a company created as an independent company becomes dependent on another market participant. Usually this is due to financial difficulties.

There are quite a lot of examples of such “absorption”. For example, the Volkswagen concern turned many auto manufacturing companies in Europe into subsidiaries using a similar method.

Once the firms have mutually made this decision, they must comply the following actions:

• properly establish the procedure and tools with which the parent organization can influence the subsidiary (for example, draw up an agreement or change the charter);
• the subsidiary must have all the necessary details, including its own current account, legal address, seal;
• it is necessary to select managers of the subsidiary company, including a director and chief accountant;
• apply to the State House with necessary documents(certificate from the bank about the account status, characteristics on officials, information about the founders, fund, charter);
• obtain a certificate of registration of a subsidiary.

A subsidiary is often compared to branches and representative offices of legal entities. These concepts have common features, but at the same time are very different from each other.

Branches and representative offices are mentioned in Art. 55 Civil Code of the Russian Federation. This article presents legal definitions of such concepts:

• representation — separate division company, which is located outside its location, represents the interests of the company and implements their protection;
• branch- a separate division of the company, which is located outside its location, exercises all or part of its powers (including those assigned to representative offices).

In accordance with Part 3 of Art. 55 of the Civil Code of the Russian Federation and branches are not legal entities. They do not have their own property and governing bodies. All this is provided by the main company or partnership. Managers manage branches or representative offices on the basis of a power of attorney. Information about subordinate structures must be indicated in.

Thus, the main difference is that subsidiaries are independent companies that are full market participants. They have their own property, are responsible for their actions, and have their own governing bodies. The subsidiary operates on the basis of its charter.

Main company Always will be responsible for the obligations of its representative offices and branches. Any penalties will be applied to her. Head organization always acts in court on behalf of its branches and representative offices.

At the same time, the law defines cases when it will be held liable for transactions of a subsidiary. Moreover, it can be solidary and subsidiary, depending on the specific circumstances of the case.

The procedure for creating these forms of dependent market entities also differs. Thus, branches and representative offices are formed by decision of the main organization. To create them, appropriate changes are made to the company's charter.

Subsidiaries are founded in the same manner as other legal entities.

The decision to create is made founders of the company. The subsidiary company can begin its activities when the tax office makes a decision on its registration.

Advantages and disadvantages

Among advantages subsidiary enterprise the following can be noted:

• in case of bankruptcy, debts will be repaid by the main company;
• The parent organization is also responsible for the budget and expenses;
• the absence of fierce competition, which is waged not by a subsidiary, but by the main enterprise.

The main disadvantage This form is full accountability of the parent company. In such conditions, it can be problematic to develop an organization. All capital is managed by the parent company, which means that only it can decide on the possibility of financing certain areas. In addition, there is a risk of closing a subsidiary due to the liquidation of the main company.

For the parent organization, this form of interaction may be associated with additional costs, for example, in the event of unprofitable transactions or insolvency.

So, a subsidiary is a popular way of organizing interaction between two market entities. Thanks to this model, smaller firms can stay afloat at the expense of larger organizations. Those, in turn, expand even further, increasing income and the number of consumers.

Mergers and acquisitions of companies are described in detail in this video.

A subsidiary is an independent entity whose controlling stake or authorized capital belongs to the parent company. The entity has the right to control supplies, sales of products, and transportation, but all its income belongs to the parent organization. The latter provides funds for needs: ensuring continuity of production, paying salaries, etc.

Features of a subsidiary

The “daughter” is directly dependent on the condition of the main subject. The latter actually ensures the activities of the organization and controls it. Let's consider the advantages of a subsidiary:

• All debts of the subsidiary are repaid by the parent organization.
• All financial responsibility rests with the main company.
• The parent company must also provide a competitive advantage.

However, a child entity also has disadvantages:

• Lack of freedom to choose production direction and other basic aspects of activity.
• Limited opportunities for technical development.
• It is difficult to accumulate funds for development, since all capital belongs to the parent company.

Subsidiaries are usually created by large enterprises. They are needed to distribute areas of activity.

Ways to create a subsidiary company

To organize a subsidiary, you will need a number of documents: documentation of the main entity, the charter of the subsidiary, a decision to create a company in writing. The parent entity must confirm that it is currently free of debt. There are two ways to create a company.

First way

Let's consider detailed algorithm creation of a subsidiary organization:

1. Drawing up the charter of a subsidiary company. The document must specify all the conditions for the existence of the subject.
2. If the fixed capital has several owners, it is required to draw up an agreement with the distribution of shares.
3. Drawing up by the founders of a protocol that confirms the fact of creation of the entity.
4. The director of the parent company must create a document indicating the contacts and address of the subsidiary.
5. Issuance of a certificate confirming the absence of debts.
6. Filling.
7. After completing all the listed documents and appointing a chief accountant, you need to provide the papers to representatives of the tax authority with which the subject is registered.

If the main office has debts, it will not be able to adequately finance the subsidiary.

Second way

The first method involves the creation of a company, the second - the assignment of already existing organization. That is, absorption occurs by mutual creation. Let's consider the algorithm of this procedure:

1. Selecting the direction of production for a subsidiary.
2. Development of the organization's charter.
3. Development of your own print, bank details, registration of the address of the acquired entity.
4. Appointment to the position of General Director and Accountant. Coordination with them of all aspects of activity.
5. Applying to the State Chamber with an application and the main list of documents: a certificate from the banking institution about the account, characteristics of the general director and chief accountant of the subsidiary, the charter with all signatures, letter of guarantee, information about the founder in writing, copies of documents with payments (the last two documents must be certified).
6. Obtaining a certificate that the subject has been registered.

After all these steps, the company can begin its activities.

Responsibility of parent and subsidiary companies

A subsidiary is an independent entity. The organization owns both capital and property. She is not liable for the debts of the parent entity. However, the parent organization is responsible for the debt of the subsidiary in certain circumstances:

• Execution of the transaction at the direction of the parent company. This instruction must be documented. In this situation, both the subsidiary and the parent organization are responsible in equal shares.
• The subsidiary was declared bankrupt due to the orders of the parent company. In this case, if the subsidiary does not have the resources to pay off the debt, the main office pays the balance.

In all other cases, the subsidiary itself is liable for its debts.

Subsidiary management

The management of a subsidiary company has a number of features:

• A large number of management subjects.
• Irreversible impact on the “daughter”.
• Independence of the organization in conducting economic activities.
• Restrictions on the activities of the subsidiary.

There are several models for managing a subsidiary organization. Let's look at them all.

Sole executive structure

Management through a single body is the most common option. By sole body is meant CEO. He has the following responsibilities:

• Working on current tasks.
• Management of existing property (its value should not exceed 25% of the book value of assets).
• Management of the internal structure of the organization.

The CEO has fairly broad powers. So that the parent company can keep track of everything management decisions, it makes sense to draw up a document regulating all the rights and obligations of a person. Relevant instructions can be included in the charter.

All key management decisions can be made by the board of directors, which includes the owners of the parent organization. This model is relevant when there are a small number of subsidiaries. Otherwise, the following problems may arise:

• Overload of board members.
• Difficulty in coordinating decisions.

The board of directors is limited in decision making. If the council makes a decision that is not within its competence, it will not be valid in accordance with Articles 67 and 69 of Federal Law No. 208. The competence of the council can be expanded through the powers of executive bodies. However, the latter must be included in the charter.

Management Company

The management of the “daughter” can be entrusted to the management company. The advantages of this method: centralization of management, prompt distribution of resources, the ability to coordinate all actions. However, if there are many subsidiaries, one management company it's hard to keep track of them.

Governing body

The essence of the board is that the heads of the subsidiaries are members of the board of the main entity. It is necessary to conclude with each of the board members employment contract. The features of the formation of the board are similar to the election of the general director. Members of the management team are elected by the meeting of shareholders or the board of directors.

Features of taxation

“Subsidiaries” and parent companies, from a tax point of view, are recognized as interdependent. This gives the right to fiscal authorities to monitor the accuracy of pricing and revise taxation in accordance with market prices. Since 2008, subsidiaries have received a greater benefit when calculating taxes on profits. If the parent organization owns a controlling stake, dividends received from the subsidiary are completely exempt from profits. The benefit will not apply if the subsidiary is registered in offshore zones.

This option for expanding a business as a subsidiary is the creation of a new legal entity with the transfer of part of the property of the main company to it. Its peculiarity is that the founder is not a person or a group of persons, but another legal entity on which it will depend in the future. We tell you what the main characteristics of subsidiaries are, their pros and cons, how they differ from branches and representative offices, and also give examples of successful well-known organizations of this type.

What is a subsidiary

A subsidiary is an organization that is created by another legal entity(the main or parent company) and received part of its property. Subsidiaries are one of the options for expanding or developing a business, a way to get ahead of competitors and take a dominant position in the industry. Article 67.3 of the Civil Code of the Russian Federation is devoted to this form of management.

The main organization may decide to transfer some of the functions and responsibilities to a separate legal entity in order to deal with them more efficiently. For this new company will receive real estate, equipment, machinery, means of production or raw materials from the parent company, in the amount that, in the opinion of managers, is necessary to start work.

By creating subsidiaries, large organizations solve several problems:

• expansion of the product range, diversification of production;
• increasing competitiveness;
• development of sales activities, formation of production and sales points;
• entering new markets;
• risk management - economic or property;
• rationalization of management;
• servicing your own needs - transport, insurance, construction, financial and other services;
• development of a franchise network;
• separation of licensed types of activities;
• optimization of payment of taxes, insurance payments, customs duties;
• ensuring confidentiality of control;
• improving business image, reputation, increasing status and trust for business partners (a network of companies is perceived as a more reliable counterparty than a single legal entity).

A subsidiary company is created by the main organization to solve specific problems

The subsidiary will have its own charter, its own director, its own staff and even the rights of the owner - all this will be provided, selected and formalized by the parent company. The main organization will monitor it at all stages of work, and the junior company will regularly report on achievements achieved. Nevertheless, the “daughter” is to a certain extent an independent legal entity and can make decisions within the assigned boundaries of responsibility.

There are different ways to create subsidiaries. The main organization can create a new legal entity and attract new specialists, it can separate one of its structural divisions into a new company or “absorb” another company. The number of junior dependent LLCs and OJSCs is not limited: if resources allow, the main organization can create dozens of controlled legal entities.

Difference from branch and representative office

Creating subsidiaries is not the only option for expanding a business. The main organization can take a different route and register a branch or representative office. These concepts are often confused with each other, although this is a very serious mistake. These forms of management differ in functions, tasks, powers and scale of activity.

The main difference between subsidiaries and branches and representative offices is that they are, albeit controlled, but separate legal entities. Branch and representative office are structural units that do not have the right to act on their own behalf. Also, branches do not have their own constituent documentation, while a subsidiary necessarily has its own charter (even if developed by the main company). A subsidiary can be free in matters of production, sales, marketing, personnel (with the exception of the appointment of top managers).

Branches, as a rule, are located at a significant geographical distance from the parent company. For example, in another city, region, country. A subsidiary company can be opened even in the same building where the main one is located - their tasks and areas of work do not duplicate each other.

Information about branches is recorded in constituent documents parent organization. They have secured property, but no property rights. The property of the branch can be used to secure the debts of the founder. That is, if the main company is forced to sell property to pay off debts, it can sell the “property” of the branch.

Options for creating a network of subsidiaries

To more clearly demonstrate how branches and subsidiaries are similar and different, let us present their characteristics in the form comparison table:

Pros and cons of opening a subsidiary

A subsidiary organization is one of the options for business development, a way to gain a foothold in the market and optimize management. It has so many features that it suits both small businesses and large enterprises. Among the undeniable advantages and disadvantages are:

• increasing the efficiency of company management;
• opportunity to develop new areas of work;
• the opportunity to enter new markets;
• optimization of taxes, insurance premiums, customs duties;
• the ability to increase management confidentiality.

Owners of subsidiaries will appreciate that all incorporation documentation will be developed and approved by the parent company. She will pass everything on to her “daughter.” necessary funds production, which saves the company from purchasing them independently. It is impossible to take this property to pay off the debts of the main organization.

An enterprise has the right to independently defend its interests in court and initiate proceedings if it considers it necessary. At the same time, the company will be independent to a certain extent, although it will be accountable to “mother”.

Now about weaknesses. In some situations, the disadvantage will be the incomplete independence of the company: this can slow down decision-making, conclusion of transactions and similar operations. The “subsidiary” will perform only those functions that the main organization entrusts to it; production freedom is not expected. The company's capital will also be controlled. For some specialists heading or working in a subsidiary organization, the disadvantage will be the lack of development prospects. Such a company will always be dependent and will not develop its own network and fight for the market.

Subsidiaries always report to the parent company, but are to a certain extent independent

Examples of subsidiaries

On Russian market quite a few subsidiaries. Many of them are well known, recognizable and are not perceived by consumers as dependent on any other organization.

Russian gas giant Gazprom annually publishes a report listing dozens of organizations. Most of them are related to gas production or transportation - Gazprom Dobycha Astrakhan, Gazprom Transgaz Nizhny Novgorod, Gaztransit. But there are also those that are not directly related to the gas industry - AVTOGAZ, “Future Fatherland”.

Another example, Cetelem Bank LLC is a subsidiary of Sberbank, specializing in consumer loans for cars and urgent needs. Sberbank PJSC owns almost 80% of the company’s authorized capital. Together, the organizations conduct a common credit program, which allows them to offer more diverse and favorable conditions to their clients. Sberbank also has subsidiary banks in Belarus, Kazakhstan, Ukraine, Turkey, Switzerland, Hungary, the Czech Republic, Serbia, Slovenia and Croatia.

JSC Russian Railways owns an impressive number of affiliates and subsidiaries. Among them we note several carriages repair companies(OJSC VRK-1, VRK-2, VRK-3), CJSC Zheldoripoteka and Lublin Foundry and Mechanical Plant. The activities of all these companies are based on some useful function for the subsidiary (in this case, Russian Railways).

Conclusion

We examined the concept of “subsidiary organization” and its key features. Such an enterprise is always a separate legal entity, although dependent on the main organization. This is the key difference between subsidiaries and branches. The “daughter” performs only the duties assigned by the “parent company”, but in exchange for this it receives the means of production and property rights to them. Registration of such a company is one of the options for business development and optimization of asset management.

A commercial company can operate in another region or even state by opening a subsidiary or branch. What are these structures?

What is a subsidiary?

Under subsidiary means a legal entity whose authorized capital belongs to the organization that founded it - the parent. Moreover, both companies can operate in different areas. Moreover, the parent organization is not always directly involved in the management of the subsidiary. But, as a rule, this happens, and the segment of the companies’ activities coincides.

Subsidiaries are established through state registration. In addition, the parent company develops a charter containing the required provisions for the subsidiary, and, if necessary, also a memorandum of association.

A subsidiary, since it is an independent legal entity, has property under its own management, with which it is liable for its obligations. In addition, this organization can be a plaintiff and defendant in court hearings independent from the parent company.

The subsidiary is not obliged to answer for the debt obligations of the parent company. In turn, reverse liability is provided for by the legislation of the Russian Federation. That is, if a subsidiary has financial difficulties, then the parent company may have subsidiary liability for the debts of the enterprise it owns.

What is a branch?

Branch- this is a structure dependent on the main organization, which is not an independent legal entity, but is located, as a rule, at a significant geographical distance from the head office. For example, in another subject of the Russian Federation.

The branch is completely subordinate to the head office in terms of management. All contracts are signed by the head of this structure, who carries out his activities under a power of attorney from the top managers of the main organization.

Information about established branches must be recorded in the company's constituent documents. These structures are formed on the basis of special provisions approved by management. State registration branches are not carried out as legal entities - you only need to notify the Federal Tax Service of their opening. If this is not done, tax authorities may issue fines. But if we talk about branches foreign companies in Russia, they must be accredited by the State Registration Chamber.

Branches have assigned property, but are not able to have property or non-property rights, do not act as a party to legal relations and are not plaintiffs or defendants in court hearings.

The property that is assigned to the branch is often used as collateral for the debts of the main organization. In turn, the head office bears property liability for the obligations of its division.

Comparison

The main difference between a subsidiary and a branch is that the first structure is legally independent from the main organization, while the second is completely connected with it. This predetermines all other differences between the two types of firms in question.

It should be noted that main organization can establish a branch in one region and a subsidiary in another, and both structures will do the same thing. Therefore, in practice, the activities of branches and subsidiaries usually do not differ much. Their status is different only on legal grounds.

Having determined what the difference is between a subsidiary and a branch, we record the conclusions in the table.

Table

When a company buys another company, the second company usually becomes a subsidiary. For example, Amazon owns many subsidiaries, including everything from Audible (recorded books) to Zappo (online shoe sales).

What is a subsidiary

A subsidiary is a company owned and controlled by another company. The company's own is called a parent company or sometimes a holding company.

The parent company of a subsidiary may be the sole owner or one of several owners.

If a parent company or holding company owns 100% of another company, that company is called a "wholly owned subsidiary."

There is a difference between a parent company and a holding company regarding operations. The holding company has no operations of its own; it owns a majority stake and owns the assets of other companies (subsidiaries).

A parent company is simply a company that operates a business and owns another business - a subsidiary. The parent company has its own operations, and the subsidiary may carry on the related business. For example, a subsidiary may own and manage the property assets of a parent company and hold liability for those assets separately.

A corporation or S corporation is owned by shareholders. In this case, the parent company usually owns 50% or more of the subsidiary's shares.

An LLC is owned by the members, whose ownership interests are controlled by an operating agreement.

An LLC can own another LLC.

Why form a subsidiary

Subsidiaries are common in some industries, especially real estate. A company that owns real estate and has multiple properties may form a common holding company, with each property being a subsidiary. The rationale for this is to protect the assets of different entities from each other's liabilities.

For example, if Company A owns Companies B, C, and D (each property), and Company D is sued, the other companies are not affected.

How is a subsidiary formed?

A subsidiary is formed by registering in the state in which the company operates. Ownership of a subsidiary is indicated upon registration.

Let's say Company A wants to create a subsidiary to manage its properties. The subsidiary, Company B, registers with the state and indicates that it is wholly owned by Company A.

How does a subsidiary operate?

The subsidiary operates like a regular company, and the parent company only has supervision. If the parent company provided day-to-day supervision of the subsidiary, this would mean that the parent assumed the responsibility of the subsidiary.

Accounting and taxes for subsidiaries

From point of view accounting the subsidiary is a separate company, so it will maintain its own financial statements, bank accounts, assets and liabilities. Any transactions between the parent company and the subsidiary must be recorded.

Many companies present consolidated financial statements (balance sheet and income statement) to shareholders, showing that the parent company and all subsidiaries are combined.

From a tax point of view, a subsidiary is a separate tax entity.

Each subsidiary has its own tax identification number and pays all of its taxes according to its type of business.

If a parent company owns 80% or more of the shares and voting rights for a subsidiary, it may file a consolidated tax return to take advantage of offsetting the profits of one subsidiary with the losses of the other. The subsidiary must agree to be included in this consolidated tax return.

Disadvantages of a subsidiary

LegalZoom notes that if the parent company is sued, it can go to the subsidiaries. “If the parent LLC has a claim or judgment against it, the assets of the subsidiaries may be at risk. Any action against the parent can legally go after the parent company's assets, which in this case are the LLC itself."

If Company B is a subsidiary of Company A and Company B receives a claim, Company A is still liable.

If it is a completely separate company, the liability remains separate.

One of the disadvantages of subsidiaries is that they are more complex from a tax, legal and accounting perspective. You'll need both tax and accounting professionals to help you set up the branch and navigate the rules.

Subsidiary v. Partnership and Associate

A subsidiary is a company that is at least partially owned by a parent company. In the case of an associate company, the parent company owns a lesser controlling interest.

The term "partner" can be misleading. In the context of company ownership, a subsidiary is similar to an associate company in which the parent company owns less than 50%.

But in the world ecommerce partnerships are contractual relationships between two individual companies to sell products or services. In this case, neither company has ownership or responsibility for the activities of the other company.

What is the difference between a subsidiary and a DBA (Doing Business As)

A subsidiary is a legal entity registered in the state. The "doing business as" or trade name status of a DBA is not a legal entity; it is the name used by a business when trading with the public. For example, XYZ Company might do business as Jim's Auto Repair.

Denial of responsibility: Accounting and taxes for subsidiaries are complex, and every situation is different. This is a very short general summary of accounting, legal, and tax for supporting situations. Get an attorney, CPA, and tax professional to help you set up and manage your subsidiary.