What Is an Affiliated Company?

The so-called affiliated enterprise refers to an enterprise that has a direct or indirect control relationship or a significant influence relationship with other enterprises. The enterprises that are connected with each other are related companies. Affiliated companies may be legally represented by a controlling company and a subsidiary company. The formation of the controlling company and the subsidiary company mainly lies in the existence of a unified management relationship between the affiliated companies. This relationship is often formed by the controlling company's substantial control over the subsidiary company.

Affiliates

The so-called affiliated company refers to the existence of direct or

Determination of affiliates

1. Each party directly or indirectly holds 25% or more of the total shares of one party;

The related enterprises mentioned in China's tax law refer to companies, enterprises, and other economic organizations that have one of the following relationships with enterprises.

(1) There are direct or indirect ownership control relationships in terms of funds, operations, purchases and sales.

(2) Both are directly or indirectly owned or controlled by a third party.

(3) Other related relationships in terms of interests.

The above mentioned mainly include those where a foreign-invested enterprise or foreign enterprise (hereinafter collectively referred to as an enterprise) has another relationship with another company, enterprise and other economic organization (hereinafter collectively referred to as another enterprise):

(1) The total number of shares held by one or the other directly or indirectly holds 25% or more;

(2) if the third party owns or controls the shares directly or indirectly to 25% or more;

(3) The borrowing funds between the enterprise and another enterprise account for 50% or more of the enterprise's own funds or 10% or more of the total corporate loan funds are guaranteed by another enterprise;

(4) More than half of the senior management personnel such as directors or managers of an enterprise or one managing director is appointed by another enterprise;

(5) The production and operation activities of an enterprise must be provided by another enterprise with concession rights (including industrial property rights, proprietary technology, etc.) in order to be carried out normally;

(6) The raw materials, spare parts, etc. (including prices and trading conditions) purchased and purchased by the enterprise are controlled or supplied by another enterprise;

(7) The sale of products or commodities (including prices and trading conditions) produced by an enterprise is controlled by another enterprise;

(8) Other interests related to the actual control of the company's production, operation and transactions include family and kinship.

Tax authorities can adjust the amount of taxable income or income of affiliated enterprises in the following ways:

The emergence of affiliates

In China, with

Legal issues for affiliates

First, the protection of the interests of creditors of subsidiary companies

Under the command and control of the controlling company, although the subordinate company is a legally independent subject, it has partially or completely lost its autonomy economically. Therefore, the operation of the subordinate company is often not for its own interests, but to control the overall interests of the enterprise or affiliated enterprises. The business plan of the subsidiary company is often only a part or a part of the overall business plan of the affiliated company. The human, financial and material resources of subordinate companies are often used as resources and tools to pursue the interests of the overall affiliated company or to control the company. In some extreme cases, subsidiary companies are often established just to promote the operation or operation of another "model company"

The concept of affiliated companies not only varies from country to country, but also its expressions are extremely inconsistent. From the history of corporate development, there have been various forms of commercial alliances, such as Carter, Syn dicate, Trust, Groups of Enterprises and Transnational Companies )and many more.

Affiliates and Enterprise Groups

In a certain sense, an affiliated enterprise is an enterprise group, or an enterprise group is a typical manifestation of an affiliated enterprise. So what is an enterprise group? In December 1987, the "Several Opinions on the Formation and Development of Enterprise Groups" (hereinafter referred to as "Opinions") jointly issued by the National Economic Reform Commission and the former National Economic Commission defined the enterprise group as: An economic organization with a multi-level organizational structure emerged from the objective needs of economic and socialized production. Its core layer is an economy with independent management, independent accounting, self-financing, tax payment, compliance with economic responsibilities, and legal personality. entity". Regarding the composition of enterprise groups, the "Opinions" states: "Enterprise groups are based on public ownership, take brand-name quality products or major products of the national economy as the leader, and take one or several large and medium-sized enterprises and independent research and design units as the main body. It is composed of multiple enterprises and scientific research and design units with inherent economic and technological links. "

As we all know, modern productivity (that is, labor, capital, means of production, technology, information, etc.) must be concentrated to a certain level or reach a certain scale in order to achieve low cost and good results. Such an economy is an economy of scale. The effect of a certain scale economy is called the scale effect. And the enterprise group is just a kind of enterprise joint organization form which is produced in order to meet the requirements of this scale economy. Although the organizational forms of enterprise groups are not the same, they still have some common characteristics. The main manifestations are as follows: First, it is a consortium composed of several independent enterprises. An enterprise group is a functional unit composed of several independent legal persons. Secondly, it often takes a giant enterprise (industrial enterprise or bank) as the core; thirdly, it integrates several enterprises by means of external extension such as controlling or holding shares or other means. Fourth, its purpose is to achieve uniform management of production and operation.

Affiliates and Kangzen

The word Konzern comes from German Konzern, and it originally meant a variety of corporate groups.

Konzern Automotive

, Is a most typical enterprise group, but also a typical associated enterprise. Konzern is an advanced form of monopoly organization. It appeared later than cartels, syndicates, and trusts. It is the most popular and common in Germany. According to the provisions of the German Joint Stock Company Law, from the perspective of the relationships between the companies within the Konzern Group, there are two types of Kangzern: one is the contract-based Kangzern; the other is the factual Kangzer-En. The former refers to the Kangzeen organization established through contractual means. In Germany, there are many types of enterprise contracts involving organizational relations between enterprises. The enterprise contracts related to the Konzern Enterprise Group are mainly "control contracts" and "profit transfer contracts". The characteristic of this type of Kang Zeen is that all enterprises must be placed under a unified leadership. This means that affiliated companies will lose their autonomy. At the same time, the conclusion of a control contract requires certain procedures. If the contract should be in writing, it must have a majority of at least three-fourths of the shareholders' meeting of the enterprise. Finally, it needs to be confirmed by business registration to take effect. The latter refers to the parent company-subsidiary-sun company in the form of the parent company-subsidiary-sun company in which the majority shareholding of an enterprise is controlled by another enterprise. This fact-based Kang Zeen means that the parent company exerts a decisive influence on the operating policies of its subsidiaries through the shareholders' meeting, the board of directors or the board of supervisors by controlling the majority equity of the affiliated enterprises. As a result, the legal consequences of de facto-based Canzern may include issues such as compensating the affiliated company for damages by the controlling company, establishing related reports, and auditing. In addition to the two important types of Kang Zeen mentioned above, if not an enterprise belongs to another company, but a legally independent company merges under the unified leadership, then they also constitute a Kang Zeen. Obviously, Kang Zeen belongs to a typical form of related enterprise.

Affiliates and cartels

The term cartel comes from the French cartel, meaning agreement or alliance. Cartel is an important form of capitalist monopoly organization. Cartel refers to an enterprise that produces similar products. In order to obtain high profits, it has reached an agreement on the division of sales markets, regulation of product quality, and determination of commodity prices to form a monopoly joint organization. However, the companies participating in the cartel have maintained their independence in production, trade, finance and law. If they violate the provisions of the mutual agreement, they will be punished by fines and revoked privileges. When establishing an agreement, formal written procedures are usually adopted, but some are only verbal agreements. Within the cartel, a committee is jointly elected by the participants, whose powers are to oversee the implementation of the agreement, to keep and use the cartel mutual fund. Due to competition, mergers, the economic crisis, and violations of the agreement, this cartel alliance is not stable, and the cartel agreement is short-lived (one share does not exceed 5 to 10 years). The main types of cartels are: cartels that specify sales prices; cartels that specify sales conditions; cartels that specify output; cartels that specify profit distribution, etc. The enterprises participating in the cartel maintain their respective independence in production, trade and finance, and still have independent legal person status in law. Therefore, the cartel is also a broad-based affiliated enterprise form, which belongs to a contract-type affiliated enterprise. On the other hand, although the formation of the cartel agreement still lies in monopoly and control, because this agreement does not substantially change the power structure of the participating cartel group, such affiliated companies are not typical.

Affiliates and Syndicates

The word syndicate comes from the French Syndicate, the original meaning "combination", it is another form of business alliance. Syndicate refers to the monopoly organizations established by a few large enterprises in the same production sector to obtain high profits by signing agreements to jointly sell products and purchase raw materials. Syndicate is also a contract-type affiliate. Companies participating in syndicates remain independent in production and law, but have lost their independence in commerce. Their sales of products and procurement of raw materials are handled by the syndicate's main office, and then distributed among the participants according to the agreed share. This concentration and monopoly in the field of circulation has led syndicates to sell products at elevated prices and purchase raw materials at lower prices. As a result of this unified operation Syndicate members are no longer connected to the market. This makes it difficult for Syndicate members to leave Syndicate. If it is to withdraw, it must establish its own purchasing and marketing institutions, open up markets, and establish channels for the supply of raw materials. However, it is very easy for them to be pushed out by syndicates. Therefore, compared with cartels, syndicate is a more stable form of monopoly organization.

Affiliates and Trusts

The word trust comes from the English Trust, meaning "trust", "trusteeship", is another advanced form of monopoly organization. It is a large monopoly enterprise composed of many companies that produce similar products or have close relations in production in order to monopolize the production and sales of certain products in order to obtain high profits. There are two main types of trust: one is a trust based on financial control, which is actually completely owned by the parent company. The power of the parent company is based on the ownership of the trust's stock, which is essentially a holding company. Major shareholders of the trust exercise financial control by holding stocks sufficient to control the entire corporate organization. The second is a trust based on complete consolidation. They are formed by the merger of similar enterprises, or by strong enterprises merging similar enterprises with weak strength. The head office of this type of trust is a business company that directly controls production and sales. Its characteristic is that the trust is an independent legal person, the participants have completely lost their independence in terms of law and business, and the trust's board of directors controls the production, sales and financial activities of the affiliated enterprises. The original owners became shareholders of the trust, and the profits were distributed according to the amount of equity.

Affiliates and multinational companies

"In modern economic life, few people have become the focus of controversy like multinational corporations. Whether in the home country or the host country, multinational corporations have always been the center of widespread debate. Multinational corporations are sometimes popular and sometimes driven out of the world ; Sometimes praised, sometimes vilified; sometimes controlled, sometimes uncontrolled ", some people think that" the expansion of multinational enterprises can undoubtedly be comparable to the invention of steam engines, electricity, and automobiles, and has become a major event in modern economic history Event ". It is also argued that "its military intervention in Greece, Iran, Lebanon, Congo and Cuba, its military dispatch activities throughout the free world countries, and its economic control over many third world countries. These facts have been removed. Everyone except those most stubborn observers was impressed that the United States has always been a terrible imperialist force after the war. "