Every entrepreneur, as well as the founder, sooner or later has a question: to open a subsidiary or not? What is the difference between a subsidiary, a branch and a representative office? Does the parent organization actually receive significant benefits when opening a reporting one? Let's take a closer look at these legal issues.

The parent company is...

A parent company is a founder who owns a controlling stake in a subsidiary (50% or more). In other words, it is the main economic society.

Here are some powers of the "mother":

• Has the right to carry out certain operations and participate in the production of certain goods of a subordinate company.
• Implements organizational and economic principles of management.
• Develops specific goals, controls the direction and development of both the company and its departments.
• It is responsible for the distribution of profits.
• This company controls not only its financial planes, but also their use in departments.
• Decides to liquidate or reorganize a subsidiary.

In order to improve the efficiency of the subsidiary, the founder may conduct. Such an analysis reveals the strengths and weaknesses of the financial performance of the business.

The subsidiary is...

A subsidiary is a branch of a large corporation with its own shares. When the established company is gaining momentum, it becomes necessary to create subsidiaries. Since investments in the subsidiary are made by the main organization, it also controls it in accordance with the concluded agreement. Most of the decisions made by the "daughter" come into force only after agreement with the parent center.

The parent company is fully responsible for the subsidiary to the regulatory authorities of the state. It is obligatory to register a “daughter” in the manner prescribed by legislative acts. Successful interaction between "mother" and "daughter" is possible only if subordination at work.

A subsidiary is a separate legal entity. In fact, it is engaged in independent economic activity. Personnel and marketing strategy issues in this enterprise are taken over by the head. The set of rules that establishes the order of work constitutes the mother center. But, according to the Charter, the daughter is responsible for the decisions made. Well, capital management is the responsibility of the main organization.

Pros and cons of a subsidiary

The strengths of the "daughter" include the following features:

• A subsidiary cannot be declared bankrupt because the entire responsibility for financial management lies with the parent.
• The marketing strategy for subsidiaries is developed by its founder. This means that he is the guarantor of product quality. The situation makes it possible to use the reputation of the main company, which has been accumulated over a long period of time, its symbols, etc.
• There is no need for a subsidiary to worry about calculations and budgeting, because the parent company does the bookkeeping.
• The parent organization is fully responsible for the expenses of the subsidiary and pays its debts.

The main disadvantages in organizational and legal relations that characterize a subsidiary:

• Deprivation of the possibility of self-development and the introduction of rational proposals for more extensive activities, and as a result - dependence on the parent company. For example, when considering , a subcompany should take into account the opinion of the main one.
• Restriction in the use and distribution of fixed capital, as this is done by the management of the main company according to a clearly defined plan.
• Influence during the bankruptcy of the “mother” or branches dependent on her on the “daughter”, up to the stop of the latter’s activities with the withdrawal of its funds to pay off debts.

Features of opening a subsidiary

Why are such companies formed and what is required to open them? Here are the main goals:

1. "Subsidiaries" are often created for use by large corporations in the event of various problems in the course of their activities. This is an opportunity to start a business from scratch, without taking into account past debts. An additionally created organization can become useful in improving the administration system and getting rid of routine work.
2. A subsidiary company helps to solve issues with the selection of personnel and participate in the fight against competitors. The holding gains an advantage in the market with the opening of more subsidiaries.
3. The “daughters” also help a lot with the development of foreign economic activity. The conclusion of transactions with foreign counterparties will play into the hands (savings are achieved through tax incentives). In many ways, the prosperity of a business depends on the ability to properly organize. New contacts and connections (including abroad) - additional opportunities and results.
4. The creation of a subsidiary increases the stability of the parent company. This, in turn, gives an excellent chance to increase financial flows and investments, to use assets and resources rationally.
5. Sometimes a strategy is used in parallel with the opening of a subsidiary. This is an opportunity to engage in a new activity and reduce risks.

To achieve the above goals, the following tasks are set for subsidiaries:

• Improving the quality and, as a result, the competitiveness of manufactured goods or services.
• Involvement of specialists in management bodies.
• Minimization of cooperative ties with the parent organization.

When opening a subsidiary, you will need:

1. Documents of the ruling and the Charter of the subsidiary organizations.
2. A legally certified decision on the application form P11001 to form a subsidiary.

Important: documentary evidence of what is missing indicates the solvency of the founder.

Responsibility of the parent organization

At the legislative level, three cases of liability were previously provided for:

1. When the relationship between the parent and subsidiary companies was proved.
2. If the parent organization has obliged the subsidiary to take part in the conclusion of the transaction. This instruction had to be documented. In this case, both entities are subsidiarily liable to the general obligations, which means that in the event of adverse consequences, the debt to creditors must be repaid by any of the firms.
3. If, as a result of the order of the parent company, the subsidiary suffered losses and turned out to be bankrupt. In this case, vicarious liability also applies. The parent company must repay part of the debt of the subsidiary.

Thanks to innovations in the Civil Code of the Russian Federation, the rule for holding the parent company liable for the debt obligations of a subsidiary has been simplified. That is, it is not necessary to prove the right of the parent company to instruct the subsidiary in the Charter of the latter or in the agreement between these two organizations.

What is the difference between a subsidiary and a branch office?

Branch- this is a subdivision of a legal entity that is located outside its territory and performs most of its appointments, including the function of representation. It is entered in the unified state register, and in its activities uses the property of the parent company and operates on the basis of its provisions. The legal entity appoints the heads of branches, who perform their duties in accordance with the provided power of attorney.

Representation is a separate subdivision of a legal entity that does not have a legal status. Its function is to represent the interests of society and to protect them. The principle of operation is in many ways similar to that of a branch: all actions are performed with the consent of the legal entity, this also applies to the appointment of managers.

Distinctive features of subsidiaries:

1. The parent company exercises relative control over the subsidiary, provides it with legal autonomy and thus influences decision-making. In contrast, a dependent society generally does not have the right to make any decisions without discussion with the parent organization.
2. "Daughter" has the status of a legal entity, which is not typical for branches and representative offices. This means that such a company can be located on the territory of the main one, which is excluded for branches.
3. A subsidiary company can be in any organizational and legal form.

Thus, subsidiaries are more independent structural units, since they have more rights and powers, and also own property on the basis of ownership. Branches and representative offices have more limited opportunities for economic management.

Save the article in 2 clicks:

In general, opening a subsidiary has a number of advantages, but, on the other hand, imposes legal liability. With a properly drawn up business plan, a “daughter” can significantly increase the company's income and reduce risks. Such an expansion of activity is quite an interesting phenomenon that deserves close attention.

In contact with

Don't know what a subsidiary is? Consider its main features, advantages and disadvantages, as well as the order of creation.

Dear readers! The article talks about typical ways to solve legal issues, but each case is individual. If you want to know how solve exactly your problem- contact a consultant:

APPLICATIONS AND CALLS ARE ACCEPTED 24/7 and 7 days a week.

It's fast and FOR FREE!

We give the data that are prescribed in the legislation of Russia in 2019. When opening a branch or subsidiary, the founders must take into account all the differences.

If many have heard about the branches, few people know about the subsidiary. We will determine whether it is worth giving preference to a subsidiary company, having considered all the nuances of work and opening.

Important Aspects

Almost all large organizations were created spontaneously - some firms were bought and others were sold. But when the assets were already identified, a spontaneous restructuring began, which exists in our time.

Therefore, the question still remains - to prefer branches or a network of subsidiaries when expanding business. There is no single answer.

The decision should be made at the head office, which will take into account the strategic goals, type of activity. Typically, branches are opened by companies that have one line of business. Most prefer to create subsidiaries.

Basic moments

The company has the right to have a subsidiary and a dependent business company, which will have the right of a legal entity.

They should be created in accordance with the requirements of the law of Russia, and in the case of creation outside the country, the laws of the corresponding state, unless other rules are established.

The company becomes dependent if the company has more than 20% of its authorized capital.

Advantages and disadvantages

Let's note the positive points:

Disadvantages of such an enterprise:

No freedom of action	Since you have to fulfill the tasks set by the parent company. Subsidiary produces what is imposed on it
No ability to control deliveries	Production and finance. And this complicates technical development.
All funds are managed by the parent company	And therefore it is difficult to invest in a subsidiary. The parent company allocates some funds, which are fully distributed
If the parent company has several subsidiaries	When they go bankrupt, he has to pay for the losses. And funds are allocated from the income of another subsidiary. In case of severe bankruptcy, the subsidiary company will also have to be closed. Only a sponsor or other company can correct the situation

Legal grounds

When creating a subsidiary, the provisions should be taken into account.

The rules for opening a branch were also considered in what was adopted by the government on December 26, 1995.

You should also be guided by separate provisions.

What is a subsidiary

A subsidiary is a branch of a large joint-stock company. It is created if there is a need to expand the activities of the main enterprise.

The parent company manages such a company, since it was originally created with the money of such a company. A subsidiary must be subordinate to the parent community.

The parent company is responsible for the subsidiary to government agencies, it is under its control.

A subsidiary company (as a legal entity) is created by other companies, transferring part of their property to it for economic management.

The founders must approve, determine who will be the head, exercise other rights of the business owner in accordance with the law.

The structure of the subsidiary is the same as the structure of the parent company. If several subsidiaries are created, a holding is formed.

In order to exercise control over the subsidiaries, the parent company may have a controlling stake. It also has the right to conclude agreements or indicate in the charter, prescribing the conditions for agreeing on a development strategy.

What is the difference with branch

A subsidiary and a branch are not exactly the same thing. The difference is the autonomy of the structure of the subsidiary from the parent company, but at the same time, the presence of an inextricable link with it.

This allows you to override other differences between a subsidiary and a subsidiary.

The parent company, which heads the subsidiary, has the right to create branches in one territorial district, and subsidiaries in another. All structures in this case can have one goal.

Therefore, in practice, the activities of a branch and a subsidiary are similar. They have only distinctive statuses on legal grounds.

The branch is an independent subdivision, but carries a limited It is placed outside the location of the main organization.

It is not a separate legal entity and does not have its own property. Leading persons are appointed at the head office, and they have the right to act only on the basis of a power of attorney.

Video: creation of a subsidiary of Ethtrade. Main news from the conference in Sochi

The subsidiary is a separate legal entity. It is created according to the same rules as LLC. It has its own property, authorized capital, and is also responsible for its activities.

The firm has the right to act on its own behalf, while the branch acts on behalf of the main organization.

Opening order

Nowadays, it is much easier to create limited liability companies. First you need to collect and issue the necessary certificates.

You will need:

• charter of the subsidiary;
• documentation of the parent organization;
• the decision to establish a subsidiary;
• statement ;
• a certificate confirming that the company has no debts.

There are 2 options for creating a subsidiary. The first option is the following. First, the charter of the subsidiary is drawn up, reflecting all the necessary conditions.

If the company has several founders, then they write an agreement on the distribution of shares. This is followed by the preparation of the protocol by the founders.

This document will confirm the creation of a subsidiary. When creating a company, the founders must indicate its location and contacts.

Responsibility of the parent organization

A subsidiary is usually independent, has personal capital and property. It is not responsible for the debts of the main organization, and the parent company is also not held liable for the debts of the subsidiary.

But the controlling enterprise should be liable for the debt and risks of the subsidiary only in such situations:

In the first situation, one of the debtors must pay off all obligations to creditors, and then the rest are not liable for debts.

In the second situation, the parent company must pay off the debt of the subsidiary, which it is unable to pay itself from its property.

The parent company also creates a controlled organization to distribute the company's resources and highlight the most promising areas of specialization.

Therefore, the competitiveness of the entire enterprise increases. A subsidiary can fulfill routine obligations, and through this, the management of the entire company can be optimized.

The transfer price and transactions reduce the amount of tax and financial losses and costs.

The process of transition to them includes the application of mechanisms of control and influence between organizations, as well as their development. For the USA and the countries of Western Europe, this stage is considered passed. As for the Russian Federation, here it is still far from completion.

General information

The above is explained by the weakness of the domestic regulatory framework. It is she who regulates the relationship of dependence. However, there is an upside to this situation. We are talking about the possibility of using someone else's experience, which is time-tested. However, this is not always implemented by the legislator. In this case, it is advisable to study the theoretical issues that are related to the relationship of interdependence between commercial organizations. Thanks to this, there will be a significant reduction in the list of problems that arise in practice.

Background Information

What does the concept of subsidiaries and dependent companies include? The relevant law must be consulted. According to it, a company is considered a subsidiary if another economic organization has the ability to determine the decisions that it makes. This can be carried out by virtue of a concluded agreement, participation (prevailing) in the authorized capital or in another way. All in the same article, the concept that defines the term "dependent society" is indicated. It is recognized as such if the dominant organization concentrates more than 20% of the corresponding shares of the first.

Management of subsidiaries and affiliates

Here, the presence of an element of indirect economic and legal control is noted. This can be seen both in the relationship of the predominant-dependent, and in the main-subsidiary companies. The presence of control indicates the existence of a relationship of subordination and power. This also applies to subordination. Thus, subsidiaries and dependent companies are connected with each other. The main ones, to one degree or another, can lead the controlled ones. That is, they influence the decisions that are made by the subsidiary. In particular, this applies to those adopted by the board of directors or the general meeting of shareholders.

Subsidiaries and dependent companies. Features of functioning

They are not deprived of the status of a legal entity due to the presence of an element of subordination. That is, we are talking about an independent subject of civil law relations. In accordance with this circumstance, subsidiaries and dependent companies are fundamentally different from representative offices and branches. The latter are considered only as subdivisions of the organizations that created them. In this case, there are a number of other nuances. For example, subsidiaries and affiliates can be created anywhere. This also applies to the location of the main organization. This is excluded for representative offices and branches.

Nuances of creation

This organizational and legal form is not named in the legislation. In this regard, we can conclude that subsidiaries and dependent companies can be created in any form permitted by the legislation of the Russian Federation. These are the following companies:

1. with additional responsibility.
2. Shareholder.
3. With limited liability.

Main differences

Subsidiaries and dependent business companies are distinguished according to one common feature. It's about a legal relationship. However, there are certain differences between them. The basis of a subsidiary is the criterion of the ability of the dominant structure to determine its decisions. At the same time, the dependent is determined by the formal condition for the participation of the predominant organization in its authorized capital.

Target orientation

Authorized capital

When using this criterion, there are certain difficulties. It is about how to define the term "predominant". As for the absence of a formal amount of participation in the authorized capital, this makes it possible to recognize the organization as the main one, even if it has a package of less than 20% of the voting shares of the subsidiary. Prevailing participation also has a number of specific nuances. It does not mean at all that the main company will influence absolutely all decisions of the subsidiary.

Financial and industrial groups, concerns and holdings

The system of companies connected by control and economic dependence is formed by the main one together with the subsidiaries. It can be called a financial and industrial group (RF), a holding (England, USA) and a concern (Germany). The content of these formations is identical. Thus, for further convenience, one general term, "holding", will be used. Its creation is objective from the point of view of business practice.

So, the enterprise has become quite large. is growing, extensive investment projects are being carried out. It becomes necessary to create divisions of the company, as well as subsidiaries. A certain hierarchy is needed. Minimization of tax and other obligatory payments is also required. Such a situation for business development is quite natural. Accordingly, we can say that the holding arises independently. What, in essence, are the largest Western companies at present? These are entire systems consisting of main and child communities that are interconnected. We are talking about groups of people who have united under one company name.

According to the statistics of the publication "Mond Diplomatic", in the 90s. about 37 thousand transnational organizations functioned. They, in turn, had approximately 170,000 branches and subsidiaries. In Russia, there are several major companies that have. For example, there are subsidiaries and affiliates of Russian Railways, RAO Gazprom, YUKOS, LUKOIL. At present, a number of domestic enterprises related to medium and small businesses are characterized by a similar organization of corporate activities in one form or another. With the help of the structure of the holding system, many important tasks can be solved, among them:

• organization of a coordinated marketing and production policy;
• effective management of subordinate enterprises.

At the same time, there is no special legal regulation. However, it is available in Western countries. Thus, the potential of this structure is not fully realized.

In the case when the company's activity is progressive and acquires an increasing dynamics of development, there may be a need to expand the business and then subsidiaries are created.

The very concept of a subsidiary indicates that this company was created not as an independent unit, but as an enterprise subordinate and accountable to the main one. Subsidiaries arise on the basis of property owned by the parent company. Also, the management team and the basis of the team are people who came from the parent company.

Dear reader! Our articles talk about typical ways to resolve legal issues, but each case is unique.

If you want to know how to solve exactly your problem - contact the online consultant form on the right or call by phone.

It's fast and free!

She is also the holder of a significant stake. However, a subsidiary is an independent legal entity that plans its activities, conducts its own personnel policy and is liable for debts.

A network of subsidiaries created by the parent company and subordinate to it is called a holding.

The formation of subsidiaries contributes to the solution of the following problems:

1. Expansion of the range of manufactured goods or services and a corresponding increase in sales markets, called diversification. The creation of specialized subsidiaries and the transfer of the most profitable business lines to them leads to an increase in the competitiveness of the entire company.
2. Expansion of foreign economic relations and the possibility of using more favorable tax and customs conditions in the activities of subsidiaries established abroad.
3. Claims management. The transfer of risky operations to a limited liability subsidiary increases the financial stability of the parent company and the holding as a whole
4. Creation of specially licensed types of activities in the parent company (banking, insurance, etc.)
5. Rationalization of management. Less significant managerial functions are transferred to the subsidiary company, thereby optimizing the activities of the parent company, increasing its productivity and efficiency.
6. Optimization of tax and financial planning, reduction of financial losses through the use of transfer transactions. There is a redistribution of income and losses between companies, attracting additional investment.

Features of creating a subsidiary and managing it

The company is considered established from the moment of its registration in the Unified State Register of Legal Entities (USRLE). The persons who signed the agreement on the establishment of the company are legally responsible for the activities of the company and its debts.

In the process of creating a new legally independent unit, which is a subsidiary, the parent company seeks to maintain a 100% participation in it, since only with the maximum ownership of shares is it possible to unconditionally manage a subsidiary. The presence of a 50% stake requires the approval and support of other shareholders in decision-making. Time is spent on holding meetings, on the appropriate formulation of decisions. The possibility of making a decision unfavorable for the parent company cannot be ruled out.

In the presence of a 100% stake, an order from the general director of the holding is sufficient to make decisions on the management of a subsidiary. A few years ago, the issue of creating subsidiaries was exclusively the prerogative of the board of directors, and this was the case for a long time, until the law was amended to allow the CEO of the holding to be granted the right to create subsidiaries.

True, these amendments open a window for fraud, allowing you to divert assets from the primary company to the side. Therefore, when creating a holding, it is advisable to retain the right to create subsidiaries for the board of directors by including this clause in the charter of the holding.

Ways to create a subsidiary

Consider several ways to create subsidiaries:

1. Creation of a new legal unit, including through spin-off.
2. Acquisition of shares (stakes) in already operating companies. Such a merger, as a rule, is beneficial to both parties, since the parent company, pursuing its goals, gives impetus to the development of the acquired company, strengthens it by investing its own funds.

In the economic and financial activities of the parent and subsidiaries, there are situations associated with the need to transfer assets from one (parent company) to another.

Such a transfer of assets from one balance sheet to another can be carried out in the following ways:

1. Free transfer.
2. Purchase and sale.
3. Rent (leasing).
4. Increasing the authorized capital in a subsidiary by transferring property.

As a rule, subsidiaries are created according to the following scheme. A new (subsidiary) company is registered as a limited liability company with an authorized capital within 100 minimum wages.

The parent company pays the required amount of the authorized capital, and leases the property and real estate. Companies resort to such a measure when, for some reason, they do not consider it appropriate to transfer highly liquid assets to their daughter.

Differences between a subsidiary and a branch

The parent company, along with subsidiaries, has the opportunity to open its branches. Subsidiaries also have the right to establish branches for the purpose of expanding and promoting their business.

A few words about what a branch is. The word branch is of Latin origin and means filial. This is a separate branch of a legal entity (enterprise, bank, company, etc.), created by this legal entity and completely subordinate to it. The branch is also located outside the territory of the legal entity.

However, the branch carries out its activities on behalf of the founder, and on behalf of the founder. The branch is obliged to coordinate all its decisions and all its activities with the management of the head enterprise. The management of the branch is appointed by the legal entity that created this branch. Thus, a branch depends on its founder both economically and legally.

Branch:

1. Not a legal entity.
2. The parent company is fully responsible for the activities of the branch.
3. The branch is managed by a senior manager (manager) appointed by the management of the head enterprise.

Subsidiary company:

1. Is a legal entity
2. The parent company is not responsible for the activities of the subsidiary.
3. The subsidiary itself decides at the meeting of shareholders who will manage it.

Legally independent business units, such as subsidiaries, respond more flexibly to market changes than branches.

Tax aspect

From the point of view of the tax aspect, the parent and subsidiaries are interdependent for tax purposes, that is, they are able to influence each other's economic activities. And the interdependence of the parent and subsidiaries gives the fiscal authorities grounds to review and control the correctness of pricing for transactions, to charge and revise taxes and markups in accordance with the current market price rate at the time of the transaction.

It should be added that since the beginning of 2008 there has been a significant income tax relief on income from a subsidiary. If the parent company has a subsidiary for more than a year, and has 50 or more percent of the shares of a subsidiary, then it is exempt from paying taxes on dividends received from the subsidiary. This benefit is valid on the condition that the subsidiary is not registered in an offshore zone, and the share of the parent company in the authorized capital of the subsidiary is at least 500 million rubles.

Management Accounting

For the successful conduct of a business, whether it is a workshop enterprise, a separate plant or an entire corporation, management accounting is required, which is maintained in order to identify and calculate:

1. Cost of production and advertising of products.
2. Demand for a particular product in the market.
3. Sales income, etc.

If a shop worker needs a school notebook and a calculator to keep such records, then the largest corporations have created data centers with powerful servers that store and process the necessary information.

Often, company executives have little idea of ​​which of the areas in their business brings the maximum profit, what are the costs of creating a manufactured product and what they consist of. Management accounting provides information that answers these and other questions and is necessary to develop a strategy that contributes to the effective management of a company.
Ideally, there should be two methods of management accounting: external and internal.

Information on external accounting is open and provided to tax authorities and financial institutions, investors and shareholders, suppliers and consumers. This includes information on the current expenses and income of the enterprise, accounts payable and receivable, the size of investments and income from them, etc.

International business practice has developed accounting standards for maintaining and providing information on external accounting. If we talk about internal accounting, then the management itself decides whether the company needs such accounting or not. Internal accounting, for example, includes production costs, which, in the process of analysis and compilation, are grouped according to type, place of their distribution and carriers of these costs.

Quality management accounting is an important component in running a business, and for its execution you need the right equipment and people. The cost of creating management accounting will pay off many times over, because whoever owns the information owns the world. And a businessman, especially a leader, needs to keep abreast, be aware of everything that happens in the company.

Subsidiary reporting

There is an important requirement for the creation of annual reporting in the holding: the level of income in subsidiaries, their financial and property status must be presented in the report in conjunction with the parent company. That is, the holding is obliged to submit a general financial statement reflecting the situation in subsidiaries. These statements include consolidated items of assets, promissory notes, profits and expenses, and cash flows.

When compiling such reporting, problems arise when the daughters are abroad. It is not always possible to make a report for a specific day. In foreign companies, reporting is carried out in the currency of the country where the subsidiary is located. Sometimes the reports of daughters may differ in the structure and content of the paragraphs. How to be? International practice answers this question as well. Reporting is carried out in several stages through the preparation of additional balance sheets, from which it then becomes possible to create a report in accordance with the requirements of the parent company.

First stage- rearrangement of balance sheets. The need for it may arise, since the requirements of the parent company may differ from the conditions for reporting in the country where the subsidiary is located.

Then the consistency of the balance sheet items approved in the parent company is compared. If necessary, corrections are made in the assessment that constitutes the balance of items. And finally, balance sheet items are recalculated in the currency of the country where the main company operates.

However, this requirement for consolidated reporting has several exceptions.

The parent company may not provide consolidated annual accounts in cases where:

1. She herself is someone's daughter, and her owners agree that she will not provide consolidated financial statements.
2. Its equity or debt securities are not traded on the securities market and the company does not plan to issue such securities.

A subsidiary is included in the consolidated financial statements from the moment of its creation or acquisition by the parent company.

As the business develops, companies expand their areas of activity, and there is a need to form new branches and departments. That is, subsidiaries are opened. In the future, organizations are combined into business groups, which consist of many firms. Subsidiaries can be created as new legal entities controlled by parent companies. As a rule, a subsidiary is controlled by decision-making at a general meeting or by the board of directors.

Creation of a subsidiary

A subsidiary is created in the same way as any other commercial institution. But at the same time, it is not an independent type of firm, since its activities are carried out according to the model of the parent organization. Basically, the main firm has a stake in the subsidiary, and with its help it influences all decisions. At the same time, the mandatory minimum participation in the capital of the "daughter", upon reaching which the company becomes the main one, is not established either by the Law on Joint Stock Companies or the Civil Code.

The influence of the parent company on the subsidiary

The parent firm does not need to have a controlling interest in order to influence a subsidiary. Two organizations can work on the basis of a special agreement or according to the charter adopted by the controlled company. For example, a firm transfers to another enterprise the right to use its own production technology for manufacturing goods. At the same time, the agreement concluded between them stipulates the condition that the subsidiary company, within a certain period of time, will coordinate the sale of goods with the controlling firm.

Responsibility of the parent company

As a rule, a subsidiary is an independent organization with separate capital and property. It is not responsible for the debts of the main company, the parent company cannot be held liable for the debts of the subsidiary. The controlling company will be liable for the debts and claims of the controlled company only in two cases:

1. If the transaction is concluded at the direction of the main organization, and there is documentary evidence of this.
2. If a subsidiary company went bankrupt as a result of following the instructions of the parent company.

In the first case, one of the debtors must fully pay off the total obligations of the creditor, the rest of the debt will be released. In the second, the main company must repay that part of the debt of the controlled company, which it is not able to cover with its own property.

Purposes of creating child structures

The main firm creates sub-control structures in order to sort out the resources of the organization and highlight the most promising areas in specialized firms. This increases the competitiveness of the entire company. Also, a subsidiary company can perform routine work, which will optimize the management of a common company. With the help of transfer prices and transactions, it is possible to reduce tax and financial losses. Registration of subsidiaries abroad contributes to the development of foreign economic activity due to preferential customs and tax conditions.