Contents:
What is a subsidiary company?
A subsidiary is a separate company whose decisions another company can determine through ownership, an agreement or another form of control. Russian Civil Code article 67.3 gives this definition for Russian companies.
A branch is part of its head office; a subsidiary signs contracts, keeps accounts and acts in its own name. Requirements differ by jurisdiction.
Why create subsidiary companies?
Groups use separate entities to divide business lines, contracts and management accounting. In construction one entity may contract with the client, another perform installation and a third supply materials. The arrangement works only when roles, prices, payments and guarantees are documented.
Before registration define assets, staff, licences, guarantees and intra-group services. See this 101 guide to site management responsibilities.
How is control structured?
Control can be complete ownership, a controlling participation or contractual authority. The percentage alone is not decisive; review the charter, shareholder agreements, appointment rights and actual decision process.
Do not call a company a subsidiary merely because it shares a brand or office. A dependent company may have different thresholds and consequences.
Who answers for debts?
Normally a subsidiary does not answer for the parent’s debts, and the parent does not automatically answer for every subsidiary obligation. Exceptions depend on the transaction, instructions, proven control, harm and applicable law.
Under Russian Civil Code article 67.3 the parent may be jointly liable for transactions made under its binding instructions or consent, subject to the article’s exceptions. Bankruptcy liability is governed by evidence and court findings under the Bankruptcy Law, including articles 61.10–61.12.
What risks require control?
Separate who signs, performs, buys and guarantees. Put loans, equipment rental, management and supplies in written intra-group agreements with primary records and prices. Keep decisions, contracts, payments and correspondence so actual control can be reconstructed.
Use a weekly construction report to review evidence and decisions. 101 can collect project expenses and documents, but software does not replace source checks.
What to check before creation?
- Set the purpose, region and activity.
- Choose the legal form and verify licences.
- Map contracts, guarantees and payment flows.
- Define approvals, instructions and access to records.
- Document intra-group prices, loans and services.
- Set separate accounting and reconciliation.
- Ask local counsel and an accountant to review the structure.
A subsidiary adds control only when its documents, authority and operations remain transparent.