The Fundamental Need of Reform in Company Law in England: Parent Company’s Liability for Debt of Insolvent Subsidiary

Yining Long(University of Leeds)

Abstract

Based on the fact that the parent company has actual control over the subsidiary company, this paper analyzes the possibility of the parent company using the subsidiary company to seek benefits and damage the interests of creditors. Moreover, under the intangible protection of the current limited liability system and the independent personality of the company, it can “retreat”. This is undoubtedly against the original intention of the establishment of enterprise groups and has great potential harm to creditors. In addition, on the basis of the relief measures for the rights and interests of the parent company caused by the bad behavior of the subsidiary, the legal defects that should be carefully considered are determined. Considering whether there are other remedies that may have the same effect as disclosure, some are more moderate than disclosure. With Britain’s strong caution about lifting the veil, a more moderate direction could be considered.

Keywords

Reform; Limited liability; Parent company; Subsidray

References

Adams v Cape Industries Plc [1990] Ch. 433 (CA (Civ Div)) .

Alan Dignam and John Lowry, Company Law (10th edn, OUP 2018).

Blumberg PIJJCL, ‘Limited liability and corporate groups’ (1985) 11 573.

Chandler v Cape Plc [2012] EWCA Civ 525.

Hofstetter KJI and Quarterly CL, ‘Parent responsibility for subsidiary corporations: evaluating European trends’ (1990) 39 576.

Rahman MRJIJOH and Science S, ‘Holding Company Liability for Subsidiary Company–A Critical Analysis under UK Companies Act 2006’ (2013) 13 92.

Re Augustus Barnett＆Son Ltd [1986] BCLC 170.

Okpabi v Royal Dutch Shell [2018] EWCA Civ 191.

Ong-Wee PGJMLR, ‘Corporate Personality-A Step Closer to Reality’ (1990) 32 355.

Salomon v Salomon & Co Ltd [1897] A.C. 22 (HL).

Schulte R, ‘Corporate Groups and the equitable subordination of claims on insolvency’ (1997).

U. S. v. Milwaukee Refrigerator Transit Co., (1905) 142 Fed. 247.

DOI: http://dx.doi.org/10.26549/jfr.v4i2.5511