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Briefcase on Corporation Law Stella October 12, 2010

Briefcase on Corporation Law Stella October 12, 2010. Company and its Branch Company. Case Summary. PARTY A ： Warren Construction Company PARTY B ： Branch Company of PARTY A PARTY C ： Yangzi Hotel. Case Summary.

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Briefcase on Corporation Law Stella October 12, 2010

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  1. Briefcase on Corporation LawStellaOctober 12, 2010 Company and its Branch Company

  2. Case Summary • PARTY A：Warren Construction Company • PARTY B：Branch Company of PARTY A • PARTY C：Yangzi Hotel

  3. Case Summary • PARTY C and PARTY B signed an Accommodation Contract (hereinafter referred to as “the Contract”) on May 21, 2004. • In accordance with the Contract, PARTY C shall provide accommodation service for PARTY B and PARTY B shall pay for the accommodation fee. • PARTY B enjoyed the accommodation service for 2 years. • PARTY B owed PARTY C 90,000 RMB accommodation fee and PARTY B failed to pay. • PARTYC sued PARTY B for a breach of the Contract.

  4. Yangzi Hotel （creditor） Accommodation fee 90,000RMB Branch Company （debtor） Warren Construction Company Case Summary

  5. Lawsuit • Plaintiff：PARTY C • Defendant：PARTY B • PARTY C claimed that • (i) PARTY B is granted a business license; • (ii) PARTY B has its own properties; • (iii) PARTY B breached the Contract and failed to perform the obligation under the Contract and • (iv) PARTY B shall perform his obligation under the Contract (i.e. PARTY B, as one PARTY of the Contract, shall pay the accommodation fee.)

  6. Lawsuit • PARTY B defended that • (i) it is a branch company of PARTY A; • (ii) it does not have the legal personality of a company and • (iii) PARTY A shall bear all the civil liabilities caused by its branch company.

  7. Points in Issue • Which party do you stand for? • Can a branch company be a subject of litigation? • Shall company bear the civil liabilities caused by its Branch Company’s conduct? • Discuss the legal relationship between Parent company (holding company) & Subsidiary Company and Company & its Branch Company.

  8. Legal Issues Concerned • I. Type of Company • Parent Company and Subsidiary Company • A parent company is a company that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors; the second company being deemed as a subsidiary of the parent company. • Company and its Branch Company • Whether a company belongs to another company or is governed by another one

  9. Legal Issues Concerned • II. Legal Relationship between Company and its Branch Company; Parent Company and Subsidiary Company • Companies may register branch companies. • Applications for incorporation of branch companies shall be submitted to the company registration authorities and a business license shall be issued for successful applications. • A branch company does not possess legal person qualification and its civil liability shall be borne by the company.

  10. Legal Issues Concerned • Compare: • Companies may incorporate subsidiaries. • A subsidiary possesses legal person qualification and shall bear civil liability independently in accordance with the law. • A Subsidiary is independent from the parent company.

  11. Legal Issues Concerned • III. Branch Company may become a subject of litigation • Although branch company is not a legal person, in accordance with the article 49 of the Civil Procedure Law of the People‘s Republic of China, it may become a subject of litigation. But the liability shall be borne by the Company. • Article 49 Any citizen, legal person or any other organization may become a party to a civil lawsuit. Legal persons shall be represented by their legal representatives in litigation. Other organizations shall be represented by their principal leading personnel in litigation.

  12. Legal Resource • Company Law of the People’s Republic of China • Article 14 • Civil Procedure Law of the People‘s Republic of China • Article 49

  13. Thank you !

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