An affiliate is a company that is subordinate to a larger parent company, being its subsidiary. The term “affiliated company” is synonymous with “subsidiary”.
Affiliates
In Russian law, the term “affiliation” appeared in 1995. Affiliates are persons who are property related and capable of influencing each other. Among them are members of the board of directors, supervisory board or other management body.
A necessary attribute of an affiliate is a dependency relationship between a legal entity and an affiliate. They can be property, contractual, or related.
Russian law prohibits transferring procurement documentation to affiliates, which ensures transparency of procurement and fair competition.
Sometimes affiliates can be persons who influence the actions of the company without formally and legally having such powers.
The concept and characteristics of affiliated companies
The term "affiliated companies" was borrowed from foreign law and became widespread since 1992. But in Russia this concept is used in a slightly different meaning from the Western one. According to Federal Law 948-1, a key sign of affiliation is the ability to influence the economic and economic activities of third-party companies and individual entrepreneurs.
If in Europe affiliated companies are dependent on other firms, then in Russian legislation the term is applied to both dependent and dominant persons.
Difficulties in the interpretation of affiliated companies are associated with the broad interpretation of the concept. In a narrow sense, an affiliate is a company in which another has a minority interest (it owns less than 50% of the shares). Affiliated companies are related to each other in terms of property and organization.
In a narrow sense, an affiliate is a company in which another has a minority interest, i.e. it owns less than 50% of voting shares. The company, which has more than 50% of the shares of another, is called the parent company. A minority company is a subsidiary or subsidiary company. The subsidiary company is always affiliated, but the term subsidiary is preferable when there is external control over the majority of the shares of the company in question.
TNCs in regions remote from the parent company often resort to creating affiliated companies.
The company can act as a branch of the parent company, while it participates in the management of the affairs of the affiliated company on the basis of an agreement. Therefore, the branch and regional network is called an affiliate network.
The affiliated company, although it carries out its own economic activity, in fact fully supports the policy of the parent company and depends on its decisions. Affiliation is often used to artificially split a business in order to optimize the tax base.
