The Legal Position of Parent Companies: A Top–Down Focus on Group Governance

Abstract

Corporate groups have been the subject of much research and debate, but mostly focussing on the position of the controlled company, e.g. the subsidiaries. There has been less focus on the legal position of the parent company in a group and the position of stakeholders in the parent company. To remedy this situation, the article makes a comparative analysis of what duties parent companies have vis-a-vis their subsidiaries. It is shown that national law differs substantially but there is a duty to collect information about the subsidiaries, and a duty to oversee subsidiaries seems to be emerging. On the other hand, there is no duty to actively manage subsidiaries in most of the jurisdictions examined. Subsequently, a comparative analysis is made of the remedies available in national law to protect the interests of stakeholders in the parent companies. Whereas there are several rules on group law which prevent subsidiaries from being used to circumvent regulation aiming to protect stakeholders in the parent company and several rules ensuring transparency about the performance of the group, it is argued that there is a lack of rules ensuring transparency about intra-group transactions and rules ensuring the influence of shareholders in the parent company. Finally, it is argued that the ongoing harmonising of group law in the EU should also include aspects that clarify the position of parent companies in a group.