The establishment of the parent company – subsidiary model established in practice because of the dependent and independent nature of the subjects in that model. So, for the parent company, how are the parent company’s rights and responsibilities for the subsidiary regulated? LSX Lawfirm will give you an article about: “Rights of the holding company towards its subsidiaries in Vietnam, as follows:
Legal grounds
Law on enterprises 2020
Holding company
The parent company in the group of companies can dominate the subsidiary in terms of capital; management or company development strategy. Specifically:
– First, financial control: the parent company owns more than 50% of the charter capital; or the total number of issued ordinary shares of the subsidiary.
– Secondly, dominate the management apparatus: the parent company has the right to directly; or indirectly appoint the majority or all members of the Board of Directors; Director or General Director of the subsidiary.
– Thirdly, govern the organization of production and business activities: the parent company; has the right to decide on the amendment and supplementation of the charter of the subsidiary.
Subsidiaries
Subsidiary is a company controlled by the parent company; which is provided with business benefits from the association contract performed with the parent company; and at the same time performs business tasks assigned and performed by the parent company. its rights and obligations.
Related article: Procedures need to do after establishing Representative Office in Vietnam
Rights of the holding company towards its subsidiaries in Vietnam
– Depending on the legal type of the subsidiary, the parent company exercises its rights and obligations as a member; owner or shareholder in relation to the subsidiary.
Contracts, transactions and other relationships between the parent company and its subsidiaries must establish and performed independently; and equally under the conditions applicable to independent legal entities.
– The parent company is responsible for the damage caused
- Firstly, where the parent company intervenes beyond the authority of the owner; member or shareholder and forces the subsidiary to conduct business activities contrary to normal business practices; or to carry out unprofitable activities without If the parent company fails to make reasonable compensation in the relevant fiscal year; causing damage to the subsidiary, the parent company shall be liable for such damage.
- Secondly, The manager of the parent company is responsible for intervening to force; the subsidiary to carry out the above-mentioned business activities to be jointly responsible with the parent company for such damage.
- Thirdly, If the parent company fails to compensate the subsidiary in the above case; the creditor or member; or shareholder who owns at least 1% of the charter capital of the subsidiary has the right to act on his/her own; or in the name of the company
Related questions about “Rights of the holding company towards its subsidiaries in Vietnam”
– A company that is a subsidiary company will not be allowed to contribute capital or buy shares of the parent company.
Subsidiaries of the same parent company may not jointly contribute capital or purchase shares for cross-ownership. If they are subsidiaries with the same parent company, which is an enterprise owning at least 65% of State capital, they may not jointly contribute capital to establish an enterprise.
The holding company directs, coordinates activities and decides on important issues of personnel and production and business of the subsidiary according to the general strategy of the parent company – subsidiary model. . This model not only has two layers of linking parent company – subsidiary company, but there are additional layers of linkage between the subsidiary – its subsidiary (also called a subsidiary company if the parent company is the center). ), the association between the parent company – the grandchild company and most of the companies have the parent’s last name.
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