CAN A PARENT COMPANY IN EUROPE CAN BE HELD LIABLE FOR LIABILITIES OF A SUBSIDIARY ?
A limited liability company's shareholders are nevertheless not automatically held liable for the liabilities of the subsidiary. For instance , in Kodak Ltd v Clark ,it was held that even-though parent is having about 98% stake in its subsidiary , it does not give rise to give an agency type of relationship under English law.
A particular risk arises when a parent company is being sued for the actions of the board members of the its subsidiary. If parent company has appointed majority of the directors of subsidiary to look after the interest of parent company , and if a third party sustains loss due to actions of board of subsidiary , then in such scenarios , a parent company may be sued to recover the losses sustained with their subsidiary as described in Grantham R , " Liability of Parent Companies for the Actions of the Directors of the Subsidiaries , Company Lawyer , 18 (5) (1997) p.138.
Thus , if the majority of subsidiary company's board consists of the parent company's nominee directors and if loss is sustained by a third party , then in such scenario , a third party can sue the parent company for the actions of a subsidiary company.
Further ,Italy , Germany and France are now the members of the EU and they are bound by the European Company law now.
In Akzo Nobel v European Commission ( C-97 /08 ) , it was held by ECJ that there is a rebuttable liability resumption of parent companies for their subsidiary's cartel offenses in the case of 100 % shareholding.
Further , piercing of corporate veil, under EU law , ECJ can consider subsidiary companies as a single unit for competition objectives. If the parent is a monopoly which set up ten different subsidiaries to deem it to demonstrate as if there is a competition , then ECJ could consider all companies to be a single economic unit.
Hence , ECJ would never hesitate to pierce the corporate veil when a third party sustains a loss in a subsidiary due to actions of parent company in EU.
As now Italy , France , Germany is the member nations of the EU and falls under EU Single Market , any appeal( even court in Italy or Germany may held that parent company is not liable) on query relating to Parent company liable to subsidiary debts goes to ECJ , then ECJ will give such views given by it earlier in Akzo Nobel v European Commission ( C-97 /08 ) and in Wibru / Swissair and such decisions will be binding on the member nations of EU like Italy or France.
For instance , there has been a lot of controversies in UK as regards to Human rights violation under UK law as some provisions were inconsistent with the EU Human Rights Law. There were conflicts of opinion by UK courts and ECJ.
Later , UK has completed installed the ECJ Human Rights Regulations in its Act ( now UK Human Rights Act ) so as to avoid conflict with ECJ Human Rights Act.
A particular risk arises when a parent company is being sued for the actions of the board members of the its subsidiary. If parent company has appointed majority of the directors of subsidiary to look after the interest of parent company , and if a third party sustains loss due to actions of board of subsidiary , then in such scenarios , a parent company may be sued to recover the losses sustained with their subsidiary as described in Grantham R , " Liability of Parent Companies for the Actions of the Directors of the Subsidiaries , Company Lawyer , 18 (5) (1997) p.138.
Thus , if the majority of subsidiary company's board consists of the parent company's nominee directors and if loss is sustained by a third party , then in such scenario , a third party can sue the parent company for the actions of a subsidiary company.
Further ,Italy , Germany and France are now the members of the EU and they are bound by the European Company law now.
In Akzo Nobel v European Commission ( C-97 /08 ) , it was held by ECJ that there is a rebuttable liability resumption of parent companies for their subsidiary's cartel offenses in the case of 100 % shareholding.
Further , piercing of corporate veil, under EU law , ECJ can consider subsidiary companies as a single unit for competition objectives. If the parent is a monopoly which set up ten different subsidiaries to deem it to demonstrate as if there is a competition , then ECJ could consider all companies to be a single economic unit.
Hence , ECJ would never hesitate to pierce the corporate veil when a third party sustains a loss in a subsidiary due to actions of parent company in EU.
As now Italy , France , Germany is the member nations of the EU and falls under EU Single Market , any appeal( even court in Italy or Germany may held that parent company is not liable) on query relating to Parent company liable to subsidiary debts goes to ECJ , then ECJ will give such views given by it earlier in Akzo Nobel v European Commission ( C-97 /08 ) and in Wibru / Swissair and such decisions will be binding on the member nations of EU like Italy or France.
For instance , there has been a lot of controversies in UK as regards to Human rights violation under UK law as some provisions were inconsistent with the EU Human Rights Law. There were conflicts of opinion by UK courts and ECJ.
Later , UK has completed installed the ECJ Human Rights Regulations in its Act ( now UK Human Rights Act ) so as to avoid conflict with ECJ Human Rights Act.
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