Subsidiaries are a very important part of companies that allow them to grow faster and reach more customers. Learn more about them.
What is a subsidiary? Definition of the term
A subsidiary – is one that reports directly to another entity. In a company, several types of subsidiaries can be distinguished: branches, subsidiaries, representative offices. Depending on what stage of development a company is at, it may operate exclusively within the country, but may also have its subsidiaries in other countries. The most common subsidiaries in Poland include branches of banks, chain stores and insurance companies.
Subsidiary – legal aspects
According to Art. 4 of the Law on Business Activity, a subsidiary is an entity that is owned by a business entity that is owned by a natural person, as well as an entity that is owned by a legal person or an organizational unit without legal personality, to which the legislature has given legal personality, that is owned by the State Treasury, a local government unit or other entity referred to in the law, as well as a unit that is owned by a business entity that is owned by a natural person, as well as a unit that is owned by a legal person or an organizational unit without legal personality that has been given legal personality by the legislature.
A subsidiary entity may also be established by a natural person, a legal person or an unincorporated organizational unit to which the legislature has given legal personality, or by the State Treasury, a local government unit or another entity referred to in the law.
A subsidiary may have the same type of business as the parent entity, but may also conduct a different type of business. A subsidiary entity may be established in the form of a civil partnership, general partnership, partnership, limited partnership, limited joint-stock partnership, joint-stock company, foundation, association, legal entity or unincorporated organizational unit granted legal personality by the legislature.
When is an entity a subsidiary?
Subsidiaries often have limited autonomy, as they report directly to the parent entity. In this case, the parent entity is responsible for all activities and has more influence over its operation. However, subsidiaries can operate on their own within certain limits and rules. An example of such a unit is a bank branch, which has limited autonomy, but at the same time can operate on its own within certain limits and rules. Subsidiary units also have their own separate structures and may be run by people independent of the parent unit. In the case of a bank branch, it may have its own structure and be run by persons independent of the central bank. Subsidiaries may also operate in markets other than the parent company. An example of such a unit is a representative office of a company in another country.
Subsidiaries are often used by companies to expand their business in other markets. This allows companies to grow faster and reach more customers. Subsidiary units are also often used by companies to operate in areas that are difficult to access for the parent units. An example of such a unit is a bank branch in a small town, which is able to reach customers who would have difficulty getting to the central bank.
