Read full title
Q&As
Is a parent company liable for the acts or omissions of its subsidiary?
Published on: 30 July 2018
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.
Such circumstances may arise where the parent company:
- •
has taken direct responsibility for devising a health and safety policy the adequacy of which is the subject of the claim, or
- •
controls the operations which give rise to
Get your quote today and take step closer to being able to benefit from:
- Instant clarification on points of law
- Smart search
- Workflow tools
- 36 practice areas
Get a LexisNexis quote
* denotes a required field
To view the latest version of this document and thousands of others like it,
sign-in with LexisNexis or register for a free trial.
Powered by Lexis+®
Jurisdiction(s):
United Kingdom
Key definition:
Subsidiary definition
What does Subsidiary mean?
There are two suggested definitions for the term 'subsidiary', as commonly used in agreements. CA 2006, s 1159 provides that a company is a holding company of another company (its subsidiary) if it satisfies one of three tests, two of which require it to be a member of the other company (as well as to possess certain rights, which go to its voting powers). Membership of a company is a question of fact and the court has found that if a company (company A) has transferred shares in another company (company B) to a lender in connection with the taking of security and the name of that lender or the lender’s nominee has been entered in the register of members, then company A is not a member of company B in respect of those shares: see Enviroco Ltd v Farstad Supply A/S.
CONTACT US
