Branch and representative office of a legal entity. Dependent and subsidiaries

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Any organization that is focused on continuous growth in profits will move towards the expansion and scaling of core activities. And one of the ways to achieve this goal is to open a branch and representative office of a legal entity. By creating branches, various companies (including banks) increase the number of potential customers and promote themselves in new territories.

What the law says

If you study the legislation of the Russian Federation concerning this issue, you will find out that a representative office is a separate subdivision of a legal entity. At the same time, it should be located outside the location of the key office of the company and will act to realize or protect its interests. It is also important to note that neither representative offices nor branches are legal entities.

As for the branch, its role is also performed by a separate division, the purpose of which is to perform the functions of the company in part or in full on the territory of another locality. If necessary, a branch can play the role of a representative office, which indicates itsbroader legal status.

The list of features that become available after the opening of a branch is quite attractive:

• marketing analysis and promotional activities;
• administrative and judicial protection of the interests of a legal entity;
• establishing contacts with potential counterparties;
• formation of the client base as such, etc.

Obviously, this way of expanding the activities of the enterprise has its advantages.

Foreign companies

Attention should also be paid to such an issue as representative offices and branches of foreign legal entities. In fact, the purpose of such divisions is the implementation of the activities that the parent company is engaged in, but already on the territory of Russia. The liquidation of such elements of a legal entity can be carried out by decision of the foreign founder, who initially initiated the opening process.

For its part, the state also controls such activities. Accreditation of branches and representative offices of foreign legal entities acts as a regulatory tool. The implementation of this process is carried out by the federal executive body. At the same time, entrepreneurial activity is considered legal from the moment of obtaining accreditation.

Accordingly, when its effect is neutralized, it will no longer be possible to carry out any activity. If the potential activity of a branch of a foreign company is contrary to the statepolicy of protecting the interests of the country and ensuring its security, then accreditation will fail.

Branch and representative office of a legal entity: creation

In order for such separate divisions to appear, the fact of an official initiative of the authorized bodies of the company is necessary. At the same time, the legislation (Article 55 of the Civil Code of the Russian Federation) obliges the legal entity to indicate in the constituent documents all information related to the opening of such branches. This requirement is especially relevant if changes are made to the charter of the organization due to the formation of representative offices and branches. All the necessary information is transmitted in a notification manner to the state registration authority.

By the way, the changes mentioned above in the documentation of an enterprise should always be made when forming a network of divisions. Ignoring this requirement will be regarded as non-compliance with the requirements of the law.

Concerning the legal basis for the activities of such structures, it should be noted that they can function if the following documentary base is available:

• Regulations on a specific unit. It is approved at the organization level.
• Power of attorney. This document is received by the head who is responsible for a specific branch and representative office of a legal entity.
• Constituent documentation.

As for the property of a separate subdivision, it is formed on the basis of those material resources that the company assigned to it. Another source of finance can be entrepreneurialactivities (relevant for branches). The very process of disposing of property received from an organization or acquired as a result of production and business operations is regulated by a power of attorney and the Regulations provided by the parent company.

Features of activity

Initially, the powers that will guide the bodies of a legal entity - branches and representative offices - should be clearly defined. The essence and boundaries of such powers completely depend on the parent company, which makes the key decision on this issue.

This fact, in turn, means that the company acting as the founder is fully responsible for the process of the branch and subsequent results. If you have to deal with a claim against a division, then it must be presented at the location of the latter. But legally the claim will be addressed to the organization as such. Accordingly, the possible recovery will affect the parent company.

It is also worth understanding the following fact: creditors can use the property managed by the branch and representative office of a legal entity to pay off the debt of the latter. In this case, it will absolutely not matter whether the separate divisions were related to the reasons for non-payment in accordance with the obligations assumed.

How the leadership issue is handled

Of course, the unit that was opened must be managed by someone, and to do so legally. Therefore, the executive body of the company is obliged to issue a decree according to whichthe position of the head will be assigned to a specific individual.

The director of the branch will continue to act on the basis of the employment contract concluded with him, as well as using the issued power of attorney. Moreover, the power of attorney itself is issued specifically to the head, and not to the unit as a whole. For this document to be valid, it must contain the date of issue.

Because branch management is always required to act on behalf of the parent company, they cannot make any transactions on their own. This means that in the event of any adjustments or claims, the party responsible under the contract will be the legal entity, and not its division.

Rights of the leader

To carry out full-fledged activities, the director of the branch is endowed with certain rights. Their list in each case may differ, but they look something like this:

conclusion of transactions, contracts (including employment) and various legal acts that are necessary to perform urgent tasks;

• solving any issues related to the operational and current activities of the unit, without exceeding the authority and violating the algorithms of actions determined by the resolutions of the company's management bodies;
• opening currency and ruble bank accounts, as well as performing other operations as part of the cash management of the branch.

At the same time, if anyor the entrepreneur decides to make a deal with a separate division, he should make sure that the director has the appropriate authority to do this.

Work of affiliates and subsidiaries

Legislation allows companies to create subsidiaries. In fact, we are talking about the registration by the founder of another legal entity by transferring a certain part of its own property to the disposal of the latter. An open society has all the rights to use these material resources in the course of its specific activities.

Associated and subsidiaries are defined as such if the main part of their authorized capital is the property and finances of the parent company. A specific structure can also be defined as a child through an agreement, as well as any other official document.

It is important to understand that the subsidiary is not responsible for the debts of the main economic company. But with regard to transactions made in a particular region by a legal entity (branch), then for these obligations the main partnership will be jointly and severally liable with the structure that it opened.

When considering dependent and subsidiaries, it should be noted that the fact of dependence is recognized if the participating or predominant legal entity has 20% of the voting shares of the JSC. This principle also applies when owning a fifth of the authorized capital in the case of an LLC.

Bank branches

Banks as legal entities can also use the expansion scheme described above. Such structures have the ability to form a whole network of branches in the same locality where the head office is located.

A bank branch, in turn, is a subdivision that opens in a territory where a particular legal entity does not yet operate. The branch can perform all key banking operations, thereby effectively expanding coverage within the region.

In order for the bank's branch to be efficient and strictly follow the developed development strategy, a director is appointed as its head.

Results

The expansion of the company's activities through the organization of separate divisions is a fairly successful and profitable practice. Therefore, many legal entities actively use this scheme. The main thing in this business is the competent execution of documentation and equally high-quality work in all regions, which will help increase loy alty to the organization.