Corporate liability for environmental offences—parent company liability for subsidiary actions
Corporate liability for environmental offences—parent company liability for subsidiary actions

The following Environment guidance note provides comprehensive and up to date legal information covering:

  • Corporate liability for environmental offences—parent company liability for subsidiary actions
  • Duty of care test
  • Establishing breach of duty
  • Broader application?

A parent company is not responsible for the acts or omissions of its subsidiary simply by virtue of its status as parent. Each subsidiary has separate corporate responsibility and any intention to pierce the corporate veil must be clearly and unequivocally expressed in the statute.

However, a parent company can be fixed with liability if its knowledge of, and ability to, intervene in the affairs of the subsidiary are sufficient to create a duty of care towards any person suffering damage or injury due to the subsidiary's acts or omissions. Crucially, if a parent company has 'superior knowledge' about the nature and management of particular risks, and is aware of a 'systemic failure' on the part of its subsidiary, then the court may be willing to find a duty of care. It is more likely to do so if the subsidiary:

  1. has been dissolved

  2. has limited financial strength, and/or

  3. does not have insurance cover in relation to the relevant type of damage or injury

Such circumstances may arise where the parent company:

  1. has taken direct responsibility for devising a health and safety policy the adequacy of which is the subject of the claim

  2. controls the operations which give rise to the claim, or

  3. promotes in its annual reports that it is responsible for the activities of a subsidiary’s operations

However issuing of mandatory policies,