If foreign affiliates are involved, plaintiffs may, for a variety of reasons, bring an action in the English courts rather than those under the subsidiary`s jurisdiction – especially if the alternative is considered unstable or corrupt. The Parent Companies Liability Act is particularly relevant with regard to health and safety and environmental incidents; the significant harm to plaintiffs may make it attractive to sue a richer parent company. In addition, with regard to subsidiaries in the United Kingdom, there is a risk that a parent company will be exposed to charges of manslaughter by companies. In general, the corporate identities of the parent company and its regular subsidiaries should not be ignored. However, the courts will look beyond the corporate form if necessary to prevent fraud or obtain justice. For example, a parent company may become a party to the contract of its subsidiary if the conduct of the parent company indicates the intention to be bound by the contract. Such an intention arises from the circumstances of the transaction, including the parent company`s participation in the contractual negotiations. In fact, a parent company that negotiates a contract but has its subsidiary signed may be held liable as a party if the subsidiary is « a fool to the parent company. » A.W. Fiur Co.c. Ataka & Co., 71 A.D.2d 370 (1st Dept. 1979). The Cummings court dismissed the authorities cited by the holding company as distinguishable because all parties in the cited cases had a legal interest in interpreting the terms of the insurance policies or would have been directly affected by them. But as a mere parent company and majority owner of the insured company, the holding company had no legal facts or theories that gave it more than an indirect stake in the company`s insurance policies.

Companies sometimes outsource business opportunities to independent subsidiaries to limit the risk of liability of the lead company. This step can protect the principal business and an entrepreneur`s assets from lawsuits arising from the subsidiary`s actions. However, the protection does not go one way or the other, so the legal action brought against the parent company can have a negative impact on the subsidiary and its assets. It was agreed that this case did not fall under the first scenario. The Court held that `the management of UTKL`s affairs was carried out by the management of UTKL` and that, on the basis of a passage from okpabi/Shell, a `business structure itself tends to counteract the necessary proximity` between a parent company and the employees of a subsidiary and the persons concerned by it. Recent cases of parent company liability are particularly useful because they explore the nuanced challenges faced by complex companies that must balance the benefits of operating (or the requirements of local jurisdiction) through subsidiaries with the need to implement policies to maintain an always positive and cohesive group identity in an environment where consumers are increasingly influenced by the image of a company. The liability protection that forms the basis of the mother-daughter relationship does not go both ways. If the parent company is sued, its holdings in subsidiaries are considered personal property of the company. Creditors may try to seize ownership interests in other companies, and depending on the collection laws in the state where the lawsuit is filed, they may or may not succeed.

If the parent companies and subsidiaries do not maintain an adequate degree of independence from each other, a court may decide that they are indeed a company, allowing creditors to seize the assets of both without discrimination. The courts deal with things like the mixing of funds by the parent company and the inappropriate operational control of a parent company over the subsidiary to decide whether the subsidiary is simply an alter ego of the parent company and not a separate legal entity. Apart from the above rules, a parent company may be held liable for the acts of its subsidiary under the principles of veil piercing or alter ego liability. Of course, the question – which has not yet been examined by the courts – remains how a parent company should react if the insurance obtained from a subsidiary does indicate potential problems. In this case, the parent company must be careful when deciding how to ask its subsidiary to resolve the problem, and it would be desirable to limit the direction to a request for an explanation of how it will respond to the problem. Indeed, a prescriptive top-down approach may very well lead the parent to assume a duty of care that otherwise would not have existed. In practice, however, this must be weighed against the risk of harm – to life, reputation, end result or otherwise – if a problem is not resolved quickly. The court said « the complaint was silent » about TPR`s involvement in negotiating the credit accounts the plaintiff had created with the defendant girls. Slip op. to *1. In fact, the court said, although it « appears that TPR Holdings initially approached the plaintiff to obtain three separate credit accounts for its three subsidiaries. there was no claim as to who was negotiating the prices or terms and conditions of each transaction.

Id. And, according to the court, « the plaintiff acknowledged that the orders were issued separately by the defendant girls. » The Court of Appeal`s decision earlier this month in AAA & Others v. Unilever plc and Unilever Tea Kenya Limited [2018] is the third in a series of recent decisions in which the plaintiffs have sought to prosecute parent companies for infringements committed by their subsidiaries – the others being Lungowe and others against Vedanta Resources plc & Konkola Copper Mines plc [2017] and Okpabi and others against Royal Dutch Shell plc and another [2018]. . . .