Nature of branch offices
Introduction to branch offices
A branch is defined as an extension of the foreign head office company and it can engage in core activities like sales and contracts.
Branch office can carry out the same activities performed by the head office company but is not considered a separate legal entity from it. This means that the head office company is legally bound by any legal contract signed by the branch company even if it is not entered by head office management representative or permission. As such it is common business practice enforce by head office that branch has limited access to their bank account and perform implementation-related tasks without having any individual business discretion.
Therefore, unlike a subsidiary company, the parent company of a branch office entity is completely accountable for the welfare of the branch office.
It is set up in a location separate from that of head office, in various locations around the world to increase customer base, accessibility, and speed of distribution of goods and services.
A branch office is an extension of the foreign head office company. This means that the head office company is legally bound and completely accountable for any legal contracts signed by the branch company.