Organizing Foreign Branches and Subsidiaries

When planning for the formation, organization and operation of foreign branches or subsidiaries, it is important to remember that the branch or subsidiary will ultimately need to perform many of the functional activities associated with any business.  The range of activities, as well as the timing for introducing a specific activity, will depend on the strategic purpose of the branch or subsidiary.  For example, if a branch is established exclusively to launch direct sales activities in the foreign country than it is obvious that the initial investment should focus on those areas that support sales – recruitment of sales personnel, development of marketing and advertising campaigns and customer support.  Other functional areas, such new product development and manufacturing, will continue to be handled at the headquarters level until the decision is made to establish those capabilities in the foreign country.  However, even if the activities are limited to a single function the branch or subsidiary will still need to establish procedures to satisfy accounting and financial requirements, locate suitable facilities and negotiate real property purchase and lease agreements, purchase and lease equipment and other personal property for the business, obtain insurance covering its activities; implement legal compliance programs and establish management guidelines and human resources policies and procedures to recruit and retain qualified personnel.  This month's report covers some of the detailed associated with organizing foreign branches and subsidiaries.

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