Any organization that is focused on continuous profit growth will move towards expanding and scaling key activities. And one way to achieve this goal is to open a branch and representative office of a legal entity. 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 relating to this issue, you can find out that the representative office is a separate subdivision of a legal entity. Moreover, it should be located outside the location of the key office of the company and will act to implement 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 played by a separate unit, the purpose of which is to fulfill the functions of the company partially or fully in the territory of another locality. If necessary, the branch can serve as a representative office, which indicates its wider legal status.
The list of functions that become available after opening a branch is quite attractive:
- marketing analysis and advertising;
- administrative and judicial protection of the interests of a legal entity;
- establishing contacts with potential counterparties;
- formation of a client base as such, etc.
Obviously, this way of expanding the enterprise has its advantages.
Foreign companies
Attention should be paid to such an issue as representative offices and branches of foreign legal entities. In fact, the goal of such units is to carry out the activities that the parent company is engaged in, but already in 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 exercises control over such activities. The accreditation of branches and representative offices of foreign legal entities acts as a regulatory instrument. The implementation of this process is carried out by the federal executive body. At the same time, the implementation of entrepreneurial activity is considered legal from the moment of obtaining accreditation.
Accordingly, when its action is neutralized, it will be impossible to carry out any activity. If the potential activity of a branch of a foreign company contradicts the state policy of protecting the interests of the country and ensuring its security, then accreditation will not be possible.
Branch and representative office of a legal entity: establishment
In order for such separate divisions to appear, the fact of official initiative of the authorized bodies of the company is necessary. At the same time, legislation (Article 55 of the Civil Code of the Russian Federation) obliges a legal entity to indicate in the constituent documents all information regarding the opening of such branches. This requirement is especially relevant if changes are made to the organization’s charter due to the formation of representative offices and branches. All necessary information is transmitted in a notification manner to the state registration authority.
By the way, the above-mentioned changes in the documentation of the enterprise should always be made when forming a network of units. Ignoring this requirement will be regarded as non-compliance with the requirements of the law.
Regarding the legal basis for the activities of such structures, it should be noted that they can function if there is the following documentary base:
- Regulation 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 division, it is formed on the basis of those material resources that the company assigned to it. Another source of finance may be entrepreneurial activity (relevant for branches). The process of disposing of property received from the organization or acquired as a result of production and business operations is regulated directly by the power of attorney and the Regulation provided by the parent company.
Features of the activity
Initially, the powers should be clearly defined, which will guide the bodies of a legal entity - branches and representative offices. The essence and boundaries of such powers completely depend on the parent company, which makes the key decision in the framework of 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 lawsuit against a unit, 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: lenders can use the property, which is managed by the branch and representative office of a legal entity, to pay off the debt of the latter. Moreover, it will be absolutely irrelevant whether the separate subdivisions were related to the reasons for non-payment according to the obligations assumed.
How is the leadership issue resolved
Of course, the unit that was opened must be managed by someone and do it legally. Therefore, the executive body of the company is obliged to issue a decree according to which a specific individual will be appointed to the position of manager.
The branch director will continue to act on the basis of an employment contract concluded with him, as well as using the issued power of attorney. Moreover, the power of attorney is issued precisely to the head, and not to the unit as a whole. For this document to be valid, the date of issue must be present in it.
Since the management of the departments is always obliged 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 contracting party will be the legal entity, and not its unit.
Executive Rights
To carry out full-fledged activities, the branch director vested with certain rights. Their list in each case may differ, but they look something like this:
- conclusion of transactions, contracts (including labor) and various legal acts that are necessary to perform current tasks;
- resolving any issues related to the operational and current activities of the unit, without exceeding the authority and violation of the algorithms of actions defined 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.
Moreover, if any entrepreneur decides to conclude a deal with a separate division, he should make sure that the director has the appropriate authority for this.
Work of affiliates and subsidiaries
Legislation enables companies to create subsidiaries. In fact, we are talking about the registration of another legal entity by the founder by transferring at the disposal of the last certain part of its own property. An open society has all the rights to use these material resources in the process of carrying out specific activities.
Dependent and subsidiary companies are determined as such if the main part of their authorized capital is the property and finances of the parent company. A specific structure may also be determined as a subsidiary 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 business company. But with regard to transactions made in a particular region by a legal entity (branch), the main partnership will be liable for these obligations jointly with the structure that it has opened.
When considering affiliates and subsidiaries, it should be noted that the fact of dependence is recognized if the participating or dominant legal entity has 20% of the voting shares of the joint-stock company. This principle also applies to the possession of 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.
Bank branch, in turn, it is a unit that opens in the territory where a particular legal entity does not yet operate. The branch can carry out all key banking operations, thereby effectively expanding coverage within the region.
To a bank branch was effective and precisely followed the developed development strategy; a director is appointed as its head.
Summary
The expansion of the company through the organization of separate divisions is a fairly successful and profitable practice. Therefore, many legal entities actively use a similar scheme. The main thing in this matter is competent documentation and equally high-quality work in all regions, which will increase loyalty to the organization.