The easiest way to enter the market of a new region is to create a representative office or branch. In this way, not only large companies expand their activities, but also medium-sized, even small ones. Indeed, if you open a unit in another area or region, it is much easier for local workers to determine the preferences and needs of the population of a particular region. Naturally, you can go the other way and sell your products through distributors, but you canāt find them or donāt agree on the terms of cooperation.
Definition of Terms
Article 55 of the Civil Code of the Russian Federation contains a description of separate structural units that enterprises can create, their concepts and features. The main difference from the main office of such offices is that they are located outside its borders.
If we compare the branches and representative offices, then the former have a much broader legal status. In turn, the second type of structural divisions is intended more to protect the interests of the main office. In the Tax Code, the concept of these units is generally absent. On the other hand, the requirements of Article 11 of the Tax Code prescribe the use of terms within the framework provided for by industry legislation. That is, for tax purposes, it is necessary to interpret the terms ābranchā and ārepresentationā as they are deciphered in the Civil Code.
Common symptoms
The main and common feature for both structural divisions is that they do not act as legal entities, but in practice it is manifested as follows:
- units are not entitled to independently appear in court as a plaintiff or defendant, only on behalf of the head office;
- transactions with such units are concluded solely on behalf of the legal entity - the main office;
- only the head office of the organization bears all responsibility for the obligations that arose from branches as a result of business activities in the regions.
Simply put, structural units cannot act as participants in labor, tax and civil relations.
Differences in structural units
At first glance, it might seem that there are no special differences in structural units. In fact, if you carefully study article 55 of the Civil Code of the Russian Federation, you can understand that these units are distinguished by their functional purpose.
The representative office is called upon to carry out legal functions, that is, to actually protect the interests of the enterprise in the region. For example, a unit can be created for the purpose of negotiating or for concluding transactions.
The branch, in turn, is also called upon to protect the interests of the enterprise. But he has broader powers and functions, since such an office is also partly assigned the functions of the legal entity itself. For example, a branch can store products, deliver to customers, even manufacture, in addition to concluding deals and finding new customers.
What is the parent organization?
This is a legal entity that has created separate divisions. Without fail, the opening of the first, as well as subsequent branches, is displayed in the registration documents. It should be remembered that failure to enter information on the opening of new units can be regarded as a discrepancy between the constituent documents and the current legislation. This, in turn, is the basis for a fine on company officials.
The management of the main office appoints the head of the representative office, to whom the power of attorney is issued to perform certain actions.
A legal entity is obliged to provide branches with property that will allow them to carry out activities and the functions assigned to it. The responsibility for organizing accounting and financial accounting also lies with the office of the parent company. And the accounting policy for the enterprise should provide for accounting procedures "on the ground."
Property isolation
The responsibilities of the parent organization include the material support of structural units. The branch has the right to dispose of the property received and adhere to the rules for its use, which are prescribed in the Regulation or power of attorney, the charter of the enterprise. Property can be transferred to a separate balance sheet, although the law does not have such a concept. When they speak of a āseparate balance sheet of a separate divisionā, they mean a reporting document, which is prepared in accordance with the requirements of paragraph 8 of RAS 4/99 by the head office, indicating the performance indicators of the branch.
Neither a representative office nor a branch has the right to dispose of the property rights of a legal entity; they cannot manage it on the basis of economic management or operational management. But structural units can have separate bank accounts.
If the court finds a lawsuit regarding the actions of the branch, the head office will be responsible. Since the legal entity itself is responsible for the activities of the structural units, it will be it that will compensate the presented material claims by the plaintiff. In this case, the property of the representative office may act as a collection object on a par with the property of other divisions and the head office.
Creating a structural unit
The procedure for creating a regional office is simple. Information about branches is displayed only in a single register of enterprises. Previously, such information was required to be prescribed in the charter, however, if there are a lot of such units, then the entire charter may consist of hundreds of sheets, therefore in 2015 this rule was canceled.
The opening procedure consists of the following steps:
- making decisions in the manner prescribed by title documents or regulations;
- consolidation of the decision in the protocol, with the parallel appointment of the director of the structural unit and approval of the Regulation on it;
- filling out special forms (No. P13001 and P14001);
- certification of signatures on applications by a notary;
- submission of documents to the registration authority of the Federal Tax Service.
Registration of a new unit should be carried out within 5 days from the date of filing an application with the tax service. After that, the latter transfers information through its internal channels to the territorial branch of the Federal Tax Service, where a branch of a legal entity will be opened.
The time of opening a representative office must be considered the date indicated in the extract from the register.
Local regulations
Branches and other structural units of legal entities must act not only on the basis of the charter, but also a separate Regulation. This is an exclusively internal document of the enterprise that regulates the rights and obligations of the unit, its functions and goals. Such a document is not subject to state registration and a unified form is not provided for it.
When drafting the Regulation, it should be remembered that in this case the organizationās subdivision is a non-legal entity, and it cannot engage in activities that the head office does not undertake. Absolutely all transactions concluded on behalf of a branch are considered to be concluded on behalf of a legal entity with all the ensuing consequences.
Guide
Due to the isolation of branches, the management of a legal enterprise is forced to appoint a director to the unit.
The appointment is made through the approval of the candidacy of the individual in the protocol on the establishment of the unit. After that, an employment contract is concluded with the newly appointed director and a personnel order is issued, a power of attorney is created on the basis of which he will carry out his activities.
The main difference between the power of attorney and the employment contract with the branch manager is that the first document does not indicate the rights, but the duties of the director. Without such a document, a structural unit is not entitled to conclude agreements, open bank accounts, act as an intermediary, and so on.
Accounting policy
The functions of the parent organization include the obligation to organize accounting, which should be the same for all structural divisions.
Accounting can be carried out by both the head office and the unit. The first method is acceptable if all primary documents will be collected on time, by a certain date and transmitted to the head office. This method is usually practiced if the branch does not have a large number of business transactions.
In the second case, if the responsibility for accounting is assigned to the unit, the enterprise administration will have to arrange an appropriate vacancy, an office, a place for storing and processing documents.
But since the head organization is a legal entity, which is obliged to account to the fiscal authorities not only for its own activities, but also for representative offices, the final formation of financial and economic indicators should take place at the head office. Reporting is formed in this case by summing up the indicators that formed the separate units.
Scope of Responsibility
The parent organization is a legal entity, and regional units do not have this status. Therefore, they are not subjects of law and cannot independently, that is, on their own behalf, enter into legal relations. Branches do not have their own property, that is, they cannot, at their discretion, dispose of the existing one. The representative office is managed from the head office, and the branch manager acts only by proxy, in which his authority is clearly specified.
There is no clear answer regarding the responsibility of a legal entity in the Civil Code. If we analyze articles 56 and 55 of the Civil Code, we can come to a clear conclusion that a structural unit that does not have the status of a legal entity cannot be responsible for debts. This will have to be done by the head office, which owns the property of the branch.
Law No. 14-FZ gives a clear answer to the question of responsibility (Article 5) - the branch and the parent organization have different statuses, and responsibility is assigned only to the last form.
GIC and AIC have a clear list of people who can go to court: physical and legal. Representation does not fall into any category, therefore it cannot act as a plaintiff or defendant in court.
When it comes to the responsibility of the head of the organizationās division, this is a completely different situation. The director of the representative office is responsible to the management of the head office. However, the head of the branch can answer for his actions only within the framework of labor legislation or compensate for losses in the manner specified in Article 51.1. GK.
Conclusion
The parent organization is a legal entity that is responsible for all monetary obligations to third parties for its own units. The branches themselves can act only from a legal entity and cannot appear in court as a party to the dispute. For the closure of the structural unit, as well as for the opening, a decision of the participants of the legal entity will be required.