What is the relationship between the parent company and the wholly-owned subsidiary, and what is the relationship between the investment company and the investee company?

In a core technology secret case, a large number of concepts such as the respondent and the applied affiliates or shareholders, wholly-owned subsidiaries, parent companies, and capital were involved. In this regard, some netizens left a message and asked, what is the relationship?

What is the relationship between the parent company and the wholly owned subsidiary?

There is the following relationship between the parent company and the wholly owned subsidiary:

1. Control relationship: The parent company has actual control over the wholly-owned subsidiary. This means that the parent company has a decisive influence on the major decisions of the subsidiary, including business strategy, financial management, personnel appointments and dismissals, etc.
2. Share ownership: The parent company holds 100% of the shares of the wholly-owned subsidiary, thus having full ownership of the wholly-owned subsidiary. This gives the parent company full control over the subsidiary's assets and operations.
3. Separate legal personality: Although a wholly owned subsidiary is controlled by the parent company, a wholly owned subsidiary is legally a separate legal entity. This means that the subsidiary has its own name, bylaws, and organizational structure, and is able to conduct business activities in its own name, enter into contracts, and independently assume civil liability.
4. Board control: The parent company usually has the power to determine the composition of the board of directors of a wholly owned subsidiary and can directly appoint board members, thereby further strengthening the management and control of the subsidiary.
5. Financial consolidation: In financial reporting, the parent company is usually required to consolidate the financial statements of its wholly-owned subsidiaries to reflect the overall financial position of the group.
6. Business synergies: A parent company may use a wholly owned subsidiary to achieve specific strategic objectives, such as entering new markets, diversifying risks, optimizing tax structures, or conducting specific business operations.

In general, the relationship between the parent company and the wholly owned subsidiary is one of control and control, ownership and management rights that are separate but closely linked, while maintaining the independence of their respective legal persons.

What is the relationship between the investment company and the investee company?

The relationship between a capital investment company and an investee company is usually one of the following:

1. Investor-Investee Relationship: A capital investment company acts as an investor and invests its money in an investee company in anticipation of a financial return. This relationship is based on an investment contract or agreement that clarifies the rights and obligations of both parties.
2. Equity relationship: A capital investment company typically invests through the purchase of shares or equity in the investee company. This makes the investment company a shareholder of the investee company and enjoys the corresponding shareholder rights, such as dividends, voting rights, etc.
3. Strategic partnerships: In some cases, capital investment firms not only provide capital, but may also participate in the strategic planning and decision-making process of the investee companies to help them grow their businesses and enhance their competitiveness.
4. Relationship between supervision and influence: Depending on the size and type of investment, the capital investment company may have varying degrees of influence on the operation and management of the investee company. This may include sitting on the board of directors to oversee and direct major decisions.
5. Risk-sharing relationship: The capital investment company and the investee company share the investment risk. If the investee company performs well, the investment company can earn a profit, and conversely, if the investee company underperforms, the investment company may face investment losses.
6. Exit strategy: Capital investment companies typically seek to exit investments after a certain period of time, which may be achieved through the investee company going public, selling to other investors, or having the investee company buy back shares.

In general, the relationship between a capital investment company and an investee company is a complex relationship based on financial investment, business cooperation and benefit sharing, depending on the terms of the investment agreement, the size of the investment, and the degree of involvement of the investment company.

Legal relationship between the investee company and the investee company in the event of a legal dispute

When a legal dispute arises between the investee company and the investee company, the legal relationship with the investee company may be affected in the following ways:

1. Contractual liability: If the investment contract contains clauses on legal liability, dispute resolution mechanisms, or protection of the interests of the investment company, these clauses may be invoked and enforced in the event of a legal dispute between the investee company.
2. Disclosure obligations: Investee companies are obliged to disclose important information about legal disputes to the investment company, as these disputes may have a significant impact on the company's business condition, financial condition or reputation, which in turn affects the rights and interests of the investment company.
3. Protection of shareholders' rights: As a shareholder, the investment company has the right to understand and participate in the handling of legal disputes involving the investee company, especially in cases where the dispute may damage the value of its equity. This may include exercising voting rights, requesting a general meeting of shareholders or filing a lawsuit to defend one's rights.
4. Joint and several liability risk: In some cases, legal disputes with the investee company may result in joint and several liability of the investment company. For example, if an investee company faces fines or damages for violations of the law and its assets are insufficient to pay, the court may seek recourse to its shareholders (including the investment company).
5. Fluctuations in investment value: Legal disputes often have a negative impact on the market value and operational stability of the investee company, which may result in a decrease in the value of the investment company.
6. Participation in the dispute resolution process: Depending on the investment agreement and shareholder rights, the investment company may be required to participate in the legal dispute resolution process of the investee company, for example through mediation, arbitration or litigation.

In this case, the investment company should pay close attention to the progress of the legal dispute of the investee company and take appropriate actions to protect its legitimate rights and interests in accordance with the investment contract and relevant laws and regulations. This may include, for example, seeking legal advice, participating in a dispute resolution process, or adjusting an investment strategy.

To sum up, let me ask: if the invested company has legal risks, does the investment company need to bear the risks?

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