Separate subdivision opening
What is a legal entity’s separate subdivision?
A separate subdivision is any division of a company the location of which does not coincide with the company’s address. Such subdivision must have at least one workplace for a period of more than 1 month.
Separate subdivisions operate on behalf of the companies that set them up, and these companies are fully responsible for the activity of their separate subdivisions.
We have briefly described below how to register a separate subdivision and in more detail for different types of subdivisions.
What are separate subdivisions?
A branch is a company’s separate subdivision situated far from the company’s location performing the same (or some) functions as its parent company, including the functions of representative office.
A representative office a company’s separate subdivision situated far from the company’s location representing and protecting the company’s interests. A representative office cannot carry out commercial activities.
Other separate subdivisions
There are other separate subdivisions (located far and with stationary workplaces) entitled, unlike representative offices, to carry out commercial activities, but not entitled, unlike branches, to perform the functions of their parent company. Employees simply work in the workplace created in such separate subdivisions.
How to set up a branch/representative office?
1. Decision to set up a branch/representative office and approval of branch/representative office regulations
There is no need to reflect in foundation documents that a separate subdivision has been set up, but it is necessary to adopt a decision for branch/representative office establishment to set up a branch or a representative office.
Limited Liability Companies (in Russian “OOO”) set up branches/representative offices by decision of OOO general meeting of shareholders adopted by majority of at least 2/3 of the votes of OOO shareholders unless OOO charter provides for a greater number of votes.
Joint stock companies (in Russian “AO”) set up branches/representative offices by decision of AO board of directors unless АО charter provides that AO collegial executive body should.
The decision to establish a branch/representative office and the approval of branch/representative regulations are documented by drawing up minutes. These minutes must be submitted to tax authorities.
2. Branch/representative office regulations
There are no requirements for the form and content of regulations, but they must be approved as prescribed by internal documents.
It is recommended to include the following in branch/representative office regulations:
- Branch/representative office name and location;
- Objectives and functions of branch/representative office establishment:
- For branches: Perform some or all of their parent company’s functions;
- For representative offices: Represent and protect their parent company’s interests and provide for a procedure to protect those interests directly by the presentative office or the company in case they are violated by third parties;
- Management of activities:
- Title of branch/representative office head, his/her rights and obligations, procedure for appointment of head;
- For branches: restriction and/or procedure for approval of transactions that the head of the branch is entitled to conclude on his/her own;
- Information about property and whether or not the branch/representative office has its own balance sheet.
3. Power of attorney for head of branch/representative office
The head of a branch/representative office is appointed by the branch/representative office’s parent company which must issue a power of attorney authorizing the appointed head to act on behalf of the branch/representative office.
The following should be included in such power of attorney:
- Date on which the power of attorney is drafted (in words);
- The term for which it is issued if the branch/representative office regulations provides for a term of office for the head of the branch/representative office. The term of the power of attorney may be the same as the term of office of the head of the branch/representative office;
- Full company name, INN (taxpayer identification number) and OGRN (main state registration number), title and full name of the parent company’s CEO;
- Whether it is possible to delegate the powers of the branch/representative office head;
- Full name and passport details of the branch/representative office head;
- Signature of the parent company’s CEO and seal of the parent company (if necessary, if used in its activities as set out in the company charter).
If the head of the subdivision is to conclude transactions with real estate property or shares in the share capital of his/her parent company, it is recommended to get the power of attorney notarized.
4. Recording branch/representative office details in the State Register of Legal Entities
Within 3 working days of the adoption of the decision to establish a branch or representative, the parent company must submit the following to the local tax office at the location of the company establishing the subdivision :
- Application form N Р14001;
- Minutes for adoption of the decision to establish a subdivision and approval of the branch or representative office regulations.
If the required documents are not submitted to the tax office by the deadline, a fine of RUB 5,000 could be imposed or a warning could be issued to the company head.
The application may be signed by the parent company’s CEO, and the authenticity of the signature must be certified by a notary. If the tax office accepts electronic documents, then an encrypted digital signature should be used.
How to register separate subdivisions other than a branch or representative office
To register a separate subdivision other than a branch or separate subdivision, it is necessary to submit Form С-09-3-1 at the location (at the place of registration) of the company establishing the subdivision within one month of the establishment of the separate subdivision.
Late submission of this form entails a fine of RUB 200 imposed on companies and a fine from 300 to RUB 500 for company heads.
How to file documents with the tax office?
- Directly in person;
- By postal mail with the declared value at the time of mailing and a list of enclosures;
- Through government services or the website of the Federal Tax Service;
- Through a multifunctional center providing government services if your multifunctional service provides such service;
- Through a notary for a fee.
If several separate subdivisions under the jurisdiction of different tax offices are set up in a single municipality or in Moscow, St. Petersburg and Sevastopol, then it is also recommended to file a notice of tax office selection to be able to register at the location of one of the subdivisions. This is done by submitting Form N 1-6-Recording and will allow filing reporting with a single tax office for all the separate subdivisions that have been set up.
Separate subdivisions are registered within 5 working days of the filing of documents with the relevant tax office. A notice on Form N 1-3-Recording specifying the KPP assigned to the separate subdivision will also be issued then.
How to register a separate subdivision with the Social Insurance Fund?
Separate subdivisions must be registered with the Social Insurance Fund as soon as they pay salaries to employees and they have their own bank account.
To this end, it is necessary to submit the following within 30 calendar days of the subdivision establishment to the Social Insurance Fund at the location of the separate subdivision:
- Application for registration on the approved form;
- A statement from the bank confirming that the subdivision has its own bank account;
- A document confirming that the separate subdivision pays salaries to individuals (e.g. a copy of the separate subdivision regulations specifying that the subdivision makes payments to its employees).
If the deadline for registration with the Social Insurance Fund at the location of the separate subdivision is not met, the following fines could be imposed on the company:
- RUB 5,000 for a delay of up to 90 days inclusive;
- RUB 10,000 for a delay of over 90 days.
How to register a new separate subdivision with the Pension Fund of Russia?
Similarly, separate subdivisions must be registered with the Pension Fund of Russia if they pay salaries to employees and they have their own bank account.
To do so, the order authorizing the separate subdivision to make payments to individuals is to be filed with the tax office at the location of the separate subdivision. This order granting such powers must be filed within 1 month of its issuance. The local tax office will then pass on this information to the Pension Fund of Russia.