Subsidiaries in China

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Subsidiaries in China

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The company's investment is a company that invests in other companies. This kind of investment activity is allowed. Because the company acts as a legal person and has the right to use its own funds, it can invest its own funds in the operations of other companies. However, this right is not unlimited, and it is impossible to transfer all the funds of the company or most of the funds and make the company an empty shell. For a general company, it is still required to be an economic entity, with certain self-employed assets, considerable business operations and the ability to assume responsibility, that is, as a legal entity. Therefore, the company has imposed restrictions on the transfer of investment. The specific requirements are for the company to invest in other limited liability companies and joint stock limited companies. Except for the investment company and the holding company specified by the State Council, the accumulated investment amount exceeds the net assets of the company. Fifty percent, after the investment, accept the capital of the investee company to increase profits, the increase is not included. This requirement applies only to general companies and not to investment companies and holding companies established in accordance with the regulations of the State Council. The funds of these companies are specifically used for investment and holding, so they are not subject to transfer restrictions. This kind of distinction is reasonable and reasonable. It not only adapts to the business needs of the investment company and the holding company but also prevents the emergence of a group of companies that only see the virtual name and are not seen in reality, which is conducive to maintaining economic order.

The restrictions imposed by the company law on the company's transfer of investment include two aspects: the transfer of investment objects and the amount of investment transferred:

  1. Restrictions on investment objects. The law generally restricts the company from becoming an unlimited liability shareholder or a partnership partner because the unlimited liability shareholder or partnership partner bears unlimited joint liability for the company or partnership debt. If the company becomes an unlimited liability shareholder or partnership partner, once it invests If a company or a partnership cannot pay off its debts, he will bear huge risks, resulting in the company's assets being emptied and affecting the interests of the company's shareholders and creditors. Therefore, the company law of many countries and regions clearly stipulates that a company cannot become an unlimited liability shareholder or a partner of a partnership organization.
  2. By limiting the amount of investment, the company can not only expand the company's profit source through the transfer of investment, but also form a related company, form a group of companies, form a scale effect and synergy effect, thereby promoting the effective allocation of capital and promoting the rapid development of the company, but The transfer of investment behavior will also have the following negative effects: First, the transfer of investment will reduce the tangible property directly controlled by the company, and increase the difficulty of realizing debt repayment, which may reduce the company's actual solvency and increase the risk of corporate creditors; The amount of investment transferred is not only the assets (capital) of the parent company but also the assets (capital) of the subsidiary. Therefore, the transfer of investment will be a double calculation of assets (capital), resulting in a virtual increase in capital, which is contrary to the company’s capital enrichment. the rules.

In order to avoid the inflated capital, guarantee the enrichment of the company's capital, and reduce the risk of corporate creditors, the company law of some countries and regions has imposed certain restrictions on the amount of the company's investment.

Article 12 of the 1993 Company Law also stipulated the amount limit, but in 2005, the two revised company laws in 2013 removed the restrictions on the proportion of investment. The practice has proved that the amount limit for the company's transfer of investment is lack of operability.

In legal terms, the company's transfer of investment is the company's normal business behavior, the company's transfer of investment does not necessarily damage the company's credit, and harm the interests of the company's creditors. As for the risk caused by the transfer of investment, the company's own board of directors or shareholders' meeting, a general meeting of shareholders can decide on the transfer of investment, the company's articles of association can limit the amount of investment, and the company's law does not need to force it. Sexual restrictions.