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To keep it simple, a branch would arise where a new location, division, department, office....etc. is set up, yet still under the original company's name and is still part of that legal entity. That's to say the new 'branch' will not need to produce its' own set of statutory accounts.
A susidiary (and for the purpose of this example we will assume the question refers to a wholly owned subsidiary) is where a company sets up a new companyand registers the legal entity with the local authority (in the UK Companies' House) as a stand alone company. If it is 100% owned by the parent company (i.e. the one setting up the new company) then it will still be required to produce a set of statutory accounts, these will then simply be consolidated into Group Accounts by the parent.
The company I work for has a very complex domestic and overseas parent, subsidiary and branch structure, with wholly owned subsidiary companies often being legal entities in name only (non-trading), purely for tax relief and group loss transfer.
Hope this hasn't complicated the issue too much.
For simplicity, it's best to think that if the new company set up has legal registration it's a subsidiary, if not it's a branch.
Anonymous:Legally, is it the case that a branch cannot sign contracts as it has no legal entity? e.g. if a UK company setups a branch in Singapore, can the Singapore branch signs contracts with other local companies?
In the UK, branches of a company can sign contracts - it is certain people/job roles that have the authority to do this or not and the head office will set the limits of who and what type of contract. Branch managers usually have a certain amount of authority. It wouldn't be very workable if a company with, say, 1000 branches over the UK, had to refer every tiny decision back to the head office, even just to arrange a local office cleaning contract for example.
If a company starts up another company, then that new company is a subsidiary company.
Anonymous:It depends who owns it. A 100% owned company will be a "subsidiary". The fact that a company incorporates a company means nothing, they bear no relationship to one another unless they are a subscriber.
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