Legal Status of Subsidiary Company and Holding Company in the Company Law of China

Subsidiary company refers to a company of which certain amount of shares had been controlled by another company, or a company actually controlled and dominated by another company in accordance with agreement. Subsidiary company possesses independent legal person qualification, owns independent assets, company name, Articles of Association and board of directors, carries out operation activities and be engaged in all kinds of civil activities in its own name, and independently burdens all results and obligations generated by the company behaviors. While major decision making that involves company interests, or major staff assignment, shall be made by the parent company.

1. Subsidiary company refers to a company of which more than certain proportion of shares had been hold by another company, or a company actually controlled by another company through agreement. Although controlled by the parent company, the subsidiary company is still an independent enterprise that legally possesses legal person status. It has its own name and Articles of Association, and carries out business activities in its own name. Its assets are independent from those of the parent company, and both the parent company and the subsidiary company shall respectively burden their own debts, without joint liabilities.

2. Subsidiary company independently burdens civil liabilities pursuant to law. The subsidiary company is economically dominated and controlled by the parent company, but legally, it is an independent legal person. The independency of subsidiary company is reflected in: possess independent name and Articles of Association; possess independent organizational structure; possess independent assets, capable of assuming sole responsibility for its profits and losses, with independent accounting; implement all kinds of civil and economic activities in its own name; independently undertake all results and liabilities generated from the company behaviors.

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