Difference Between Branch and Subsidiary in Dubai

Setting up branches in different places is a common way for companies to grow their business on a national or international scale. Branch offices are part of the parent company and are opened to do the same business as the parent company. This helps the parent company reach more people.

Branch offices are different from subsidiary companies. A subsidiary company is a business that is owned by another company, called the holding company, which has the most shares. The parent company owns both the branch and the subsidiary company, but they are different in many ways.

The article below explains the differences between a company’s branch and its subsidiary.

Definition of Branch

A branch is an extension of the parent organisation that is set up in a different place to reach more people. It does the same things that are done at the main office. The person in charge of the branch is called the branch manager. The branch manager is directly in charge of the branch’s work and also reports to and takes orders from the head office.

Most banks and other financial institutions have branch offices that act as agents. Setting up branches in far-flung places increases the number of customers and makes the business easier to reach. It also helps distribute goods and services quickly and well.

Definition of Subsidiary

The term “subsidiary company” refers to a business that is owned and controlled by another business. When one company buys another, the company that bought the other company is usually called the “holding company,” and the company that was bought is called the “subsidiary.”

A company is a subsidiary of another company if any of the following three things are true:

• Ownership stake: If another company owns 50% or more of the corporation’s total equity share capital.
• Composition of Board of Directors: If a company’s Board of Directors (BOD) is made up of people chosen by a different company. The way BOD is put together means that all or most of the directors are chosen by another company.
• Deemed Subsidiary: If a company is a branch of a company that is itself a branch of another company.

Difference Between Branch and Subsidiary

The difference between a branch and a subsidiary can be seen in the following ways:

1. A branch is a company that is separate from the parent company but does the same business as the parent company at a different location. On the other hand, if a company owns and controls another company, the company that owns and controls the other company is called the holding company, and the company that is owned and controlled by the holding company is called a subsidiary company.
2. Branch has to tell its Head Office about how it is running. On the other hand, the holding company is in charge of the subsidiary company and owns most of its shares.
3. The Branch office might do the same kinds of business as the Head office. On the other hand, the subsidiary company might or might not do the same business as the parent company.
4. A branch is not a separate legal entity, but a subsidiary company is. It has its own identity that is different from that of its parent company.
5. When it comes to branches, accounts can be kept together or separately. However, subsidiaries keep their own separate accounts.
6. If we’re talking about investments to open a branch or subsidiary, the parent company has to put up all of the money to set up a branch somewhere else. To own a subsidiary company, on the other hand, the parent company has to put up between 50% and 100% of its own money.
7. When a branch office can’t pay its debts, the Head Office has to pay them. On the other hand, a subsidiary company’s debts do not spread to the holding company.
8. If a branch is always losing money, it is shut down. If a subsidiary is always losing money, it is sold to another company.

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Originally posted 2023-01-10 11:55:12.