Subsidiary

Article

October 23, 2021

A subsidiary (English: Subsidiary), also known as a subsidiary, refers to a company that is actually controlled by another company. The entity that controls it is called the parent company or holding company. Natural persons cannot become subsidiaries, only legal persons specified in the Civil Code can become subsidiaries. This is because natural persons will act according to their own motives, while legal persons can only determine the composition of their management team through their directors, cadres and employees, and therefore can control their actions. Usually to own a subsidiary, you must first own more than 50% of its shares. If it owns 100% of its shares, it is said to be a wholly-owned subsidiary of the parent company. But there are other control methods that are feasible, and the precise rules for how to control and how to achieve can be very complicated.

Definition

According to the Hong Kong Companies Ordinance, one company is a subsidiary of another company in any of the following situations: The company's parent company holds more than half of the voting rights. The company is a group member of the parent company, and the parent company has the right to appoint or remove more than half of the directors of the company's board of directors. The company is a group member of the parent company, and the parent company alone controls more than half of the voting rights of the company based on an agreement reached with other shareholders or members. The parent company is entitled to exert a dominant influence on the company by virtue of the provisions contained in the company’s memorandum or articles of association or equivalent documents of the nature of the constitution; or the parent company is entitled to exert a dominant influence on the company by virtue of a control contract. Dominant influence. According to the "Company Law of the People's Republic of China" (revised in 2013), companies can establish their own subsidiaries (Article 14), and their subsidiaries can also establish subsidiaries. Subsidiaries are qualified as legal persons and independently bear civil liabilities according to law (including owning independent property, own company name, articles of association, board of directors, independent external business and assuming responsibilities).

References

See

Mergers and acquisitions Branch office

Similar to the business form of a subsidiary

Company group Chaebol Jinglian South Korean chaebol

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