Original scientific paper
LIABILITY OF A PARENT CORPORATION FOR OBLIGATIONS OF ITS SUBSIDIARY
Mihaela Braut Filipović
; Pravni fakultet Sveučilišta u Rijeci
Abstract
The author in this article discusses the issue of piercing the veil of corporate entity, more precisely the liability of a parent corporation for obligations of its subsidiary according to the law of the United States of America, case law of the European Court of Justice and the Croatian law. The issue concerning the disregard of the separate corporate existence of the subsidiary is particularly raised in case of corporate groups where the parent generally exercises control over the subsidiary. The author pays a special attention to standards which have to be satisfied to pierce the veil. She examines the selected comparative systems to establish basis for courts’ decision to break through the legal entity of the subsidiary, i.e. is the mare fact that the parent exercises control over the subsidiary sufficient for such decision or courts have to establish that the parent misuses the fact that as a member of the subsidiary is not liable for obligations of the subsidiary. The veil piercing issue is highly important due to the fact that according to it the parent can be held liable for obligations of its subsidiary towards third parties. Having in mind that in most cases the parent corporations are more financially solvent than the subsidiaries, for creditors piercing the veil is a key issue.
Keywords
piercing the corporate veil; liability of a parent corporation for noncontractual obligations of a subsidiary corporation towards third parties; liability of a parent corporation for contractual obligations of a subsidiary corporation towards third parties; lifting the corporate veil; misuse of influence as a basis for piercing the veil of corporate entity
Hrčak ID:
82257
URI
Publication date:
20.12.2011.
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