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Publication date: 27.05.2024
I am studying in the third year of the State University of Economics and Technology.I specialize in contractual, economic and corporate law, in particular, I provide consultations and write articles.
A subsidiary is a company that is wholly or partially owned by another company known as the parent company. The subsidiary operates independently, but at the same time it is subordinate to the parent company. By creating subsidiaries, the parent company can expand its activities to new industries or market segments, which allows to reduce the risks associated with concentration in one area. Also, a subsidiary may perform specific tasks or functions that are not the main activity of the parent company, such as research and development, production of certain components or services, or work at different stages of the value chain.
Features of the activities of subsidiaries:
The activities of a subsidiary may have its own characteristics, which usually depend on the strategy and objectives of the parent company, as well as on the conditions of a specific market and industry. Here are some general features of the subsidiary:
1. Structural autonomy: A subsidiary may have a certain degree of autonomy in deciding strategic, financial and operational issues. Although subordinate to the parent company, it may have its own management and internal organizational structure.
2. Specialization: A subsidiary often specializes in certain aspects of the business, allowing it to compete more effectively in its niche market.
3. Synergy with the parent company: The subsidiary can use the resources and other advantages provided by the parent company to ensure its success. This can include access to customers, technology, funding and other resources.
4. Risks and responsibilities: A subsidiary may bear both unique and general risks associated with its activities. It may also be subject to internal and external regulatory constraints imposed on a wider group of companies operating in a particular industry.
The main differences between a branch and a subsidiary:
1. Legal status: A branch is a structural unit of the parent company that operates on the territory of another country or region. It does not have the status of a legal entity and is part of the parent company. A subsidiary is an independent legal entity that is usually created by the parent company and has its own structure, financial statements, rights and obligations.
2. Structure and management: The management of the branch office is usually carried out according to the policies and decisions of the parent company. It may have its own leadership and internal structure, but usually depends on central governing bodies. A subsidiary has its own management and leadership structure, which is usually responsible for its strategy and operations, although it may also report to the parent company at a strategic level.
3. Liability: The responsibility for the financial obligations and actions of the branch usually lies with the parent company. In turn, the subsidiary, as an independent legal entity, bears its own responsibility before the law and is responsible for its financial and legal obligations.
The procedure for creating a subsidiary:
The creation of a subsidiary in Ukraine can be carried out in accordance with the current legislation and procedures established by state authorities. Here are some of the steps you usually need to take to set up a subsidiary in Ukraine:
1. Choice of organizational and legal form: Before registering a subsidiary, you need to determine its organizational and legal form. It can be a limited liability company (LLC), a joint-stock company (JSC), or another form that suits the needs of the business.
2. Formation of the authorized capital: Determine the size and composition of the authorized capital of the subsidiary and make the appropriate contributions.
3. Registration in state registers: Submit documents for state registration of the subsidiary in accordance with the requirements of the law. This may include statutory documents, minutes of founders, certificates from the bank on the contribution of authorized capital and other documents.
4. Obtaining the necessary permits and licenses: Depending on the type of activity of the subsidiary, it may be necessary to obtain permits, licenses or other regulatory documents from the relevant government authorities.
Lawyer services in creating a subsidiary:
Legal services may be needed at the initiative stage of the creation of the enterprise, that is, when the founders are just making decisions, determining the organizational and legal form, and distributing rights and responsibilities. At this stage, the lawyer advice, having conducted a preliminary legal analysis of the situation, will determine the necessary organizational and legal form (JSC, LLC, TDV, etc.), advise on the legal regime of the property and the sources of its formation. During state registration, a lawyer consultation will determine the list of necessary documents and help in applying to the registrar.
