The branch or representative office is a form of secondary enterprise connected to a parent company that wishes to expand its operations to another geographical area (abroad). Sharing the same legal personality as the parent company, the branch office operates differently, and we will explore its key aspects.
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1. How A BRANCH OPERATES ?
2. THE ADVANTAGES OF A BRANCH
3. DISADVANTAGES OF A BRANCH?
4. THE STEPS TO CREATE A BRANCH
5. EXPERTS INSIGHT
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A branch is a secondary business created and managed directly by a parent company. It can be used in any form of business and carries out the same activities, always acting on behalf of its parent company. However, it has no legal autonomy. Managed by a representative (often an expatriate) of the parent company, the branch may still conduct business with its own customers.
As mentioned earlier, a branch does not have its own legal personality, and its assets are attached to those of the parent company in all cases. Similarly, all assets that the branch can benefit from belong to the parent company. All profits generated from sales go to the parent company, which can use them as it sees fit. The branch has no legal autonomy, and therefore, it has no separate assets. It is financially dependent on its foreign parent company for all of its assets, capital, and denomination. This situation will naturally have tax implications because the profits earned by the branch in the host country will be taxed in that country. To avoid double taxation, it is necessary for the home country to sign an agreement with the host country. The tax rate may generally be higher than in the home country. However, in all cases, a branch must maintain its own accounting records, even if it has no own capital. Nevertheless, the parent company will have to include the results of the branch(es) in its own accounts.
In general, it is a resident of the country of the parent company who is responsible for managing the branch. According to Article L 7321-2 of the labor code, the branch manager is defined as the person "responsible, by the head of the company or with their agreement, for being available to customers during their stay in the company's premises or facilities, to receive deposits of clothing or other items from them or to provide them with services of any kind." Therefore, they remain under the control of the parent company and must comply with the constraints arising from the requests of the parent company's management. Regarding employees, they are subject to the labor laws of the host country.
In case of financial difficulties or disputes, the branch is linked to its parent company, which can tarnish the parent company's image (which is not the case with a subsidiary).
Due to its extremely limited autonomy, the branch is hardly able to take strategic actions. The same applies internally since the branch and the parent company represent a single legal entity.
The branch must report information related to the parent company once a year. This can be problematic in some cases (sensitive data, etc.)
Banks and clients may prefer to deal with the parent company rather than the branch for major contracts, resulting in delays and administrative inefficiencies.
It is not the ideal choice for a "risky " development project since the parent company carries all responsibility in case of problems.
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The first step in creating a company is, of course, the drafting of deeds. This step is very important as it will identify the company you want to create among many others. It will provide certain information such as the company's name, the amount of share capital, its legal form, registered office, duration of the company, its corporate purpose, the valuation of each contribution, the number and distribution of shares among the associates, and the mention of the deposit of funds corresponding to cash contributions and the closing date of the fiscal year, among other details.
Drafting deeds gives your company its identity. While it may not be a legal requirement, it is strongly recommended to seek the services of an expert to successfully complete this initial step because poorly drafted deeds can render their registration invalid. The experts at DELEKY‟S can assist you in this crucial phase of establishing your business. So, don't hesitate to contact us.
The competent authority for registering deeds for the creation of companies in the Abidjan area is the Unique Window service of the Investment Promotion Center in Côte d'Ivoire (CEPICI). For companies with their registered office located outside the Abidjan area, the registration of deeds will be done at the tax services in the locality of the registered office. Deeds, even when signed, obtain legal status only when validly registered. This is why it is important to entrust the registration procedure to an expert. DELEKY‟S has a team within its organization to assist you with this process.
The business creation process continues with the uploading of registered documents, which is done on the official CEPICI website. This step is mandatory to finalize the business creation process. It is a crucial operation, and it would be wise to seek assistance from an expert. DELEKY‟S is equipped to help you upload your documents.
This is the final step. At this stage, the user must receive the documents certifying the completion of the business creation process. These documents include the notice of incorporation, the IDU certificate, and the RCCM (Trade Registry) if the registered office is within the jurisdiction of the Commercial Court of Abidjan.
The limited partnership allows for a clear division of tasks between managers and capital contributors within the company. The managers invest their energy in running the business, while the capital contributors provide financing. This way, the responsibilities of each partner are established from the beginning. You simply need to choose between being a general partner(commandité) or a limited partner (commanditaire), although this choice is not always easy.
That's why DELEKY‟S , in its operations, provides you with the opportunity to exchange ideas with experts who can help you make informed career decisions. We will assist you in selecting the type of company that best aligns with your goals. Don't hesitate to schedule an appointment with us.
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