Q&As

Is a parent company able to wind up its subsidiary? If so, what happens to any trading contracts and arrangements on the winding up?

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Published on LexisPSL on 06/12/2017

The following Banking & Finance Q&A provides comprehensive and up to date legal information covering:

  • Is a parent company able to wind up its subsidiary? If so, what happens to any trading contracts and arrangements on the winding up?
  • In what circumstances can a company be wound up and by whom?
  • Voluntary winding up by the company or directors
  • Compulsory winding up by a creditor
  • What happens to any trading contracts and arrangements on the winding up?
  • CVL
  • Compulsory liquidation
  • MVL

Is a parent company able to wind up its subsidiary? If so, what happens to any trading contracts and arrangements on the winding up?

Because we are not privy to the background of this particular situation, and it is not clear if this is a solvent or insolvent liquidation, or what role the parent plays with the subsidiary, we have kept this Q&A wide to cover a spectrum of possible scenarios. Our research therefore covers: all situations where a winding up might be possible, including by a creditor or by the company when the subsidiary is insolvent, or if the subsidiary is solvent then via a members’ voluntary liquidation (MVL). In addition, the terms of the articles of the subsidiary should be consulted.

In what circumstances can a company be wound up and by whom?

Voluntary winding up by the company or directors

For information on who can wind up a company voluntarily, and how, see Practice Note: Creditors' voluntary liquidation—circumstances in which an insolvent company may be wound up voluntarily.

Voluntary winding up is initiated by the company itself without formal external compulsion. It does so by resolving in a general meeting to enter into liquidation (a winding up). There are two prescribed circumstances in which a company may be wound up voluntarily:

  1. when the period (if any) fixed for the duration of the company by the articles

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