What happens to the subsidiaries, if it’s parent company goes bankrupt?
Jan Meriss Alfonso Assistant at Ascent Law LLC There are several scenarios in which a subsidiary will be a victim of bankruptcy. They include Unknown interference, protection from creditors, and consolidation. Then, there are also legal issues that need to be addressed. Article 190 of the 2014 Law on Enterprises (LOE) provides a process for creditors to examine the parent company for liabilities and seek compensation. Unknown interference When a parent company goes bankrupt, a subsidiary company can sue for tortious interference. This action occurs when the parent company interferes with the contractual relationship between a subsidiary company and its customer. The parent company may not intervene without the consent of the subsidiary and must act in the subsidiary's economic interest. However, it is hard to win a case against a parent company when a subsidiary goes bankrupt. This is because the law recognizes the parent company as a separate legal entity and the subsidiary will...