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Can a Holding Company Be Liable for Its Subsidiary’s Debts?

#lawyer #lawyers #litigation https://stonegatelegal.com.au/can-a-h... Video Transcript Generally, Australian law treats each company as a separate legal entity, meaning a holding company is not automatically liable for the debts of its subsidiary. This principle of limited liability allows corporate groups to structure their operations so that financial and legal risk is contained within individual entities. However, this protection is not absolute, and there are important exceptions where a holding company can become liable for a subsidiary’s debts. One key exception arises where a holding company provides contractual guarantees or indemnities for the obligations of its subsidiary. If the subsidiary defaults, the holding company may be required to meet those liabilities in accordance with the terms of the guarantee. Another major area of risk is insolvent trading. A holding company may be liable where a subsidiary incurs debts while insolvent, or becomes insolvent by incurring those debts, and the holding company or its directors knew, or ought reasonably to have suspected, that insolvency existed. In these circumstances, liquidators may pursue the holding company for compensation. Liability can also arise where the holding company is directly involved in the subsidiary’s misconduct, including misleading or deceptive conduct, or where the holding company effectively controls and directs the subsidiary’s operations in a way that blurs the separation between the entities. In rare cases, courts may also pierce the corporate veil where the corporate structure is used to perpetrate fraud, evade legal obligations, or operate as a sham, allowing liability to flow up to the holding company. Because the financial consequences can be significant, careful corporate structuring, clear governance, and disciplined financial oversight are essential to managing holding company exposure and preserving limited liability protections. Contact us today for a free 30-minute consultation with one of our experienced team of debt recovery professionals and let us help you protect your rights. Stonegate Legal At Stonegate Legal our lawyers assist and advise people, businesses and companies on all commercial litigation, debt disputes, and insolvency matters. Litigation – we act for all businesses, companies, partnerships, and people who are involved in commercial or civil disputes, we act for both plaintiffs and defendants in Court proceedings. Debt Disputes – we act for anyone involved in a debt dispute. We act for creditor plaintiffs seeking to recover a debt, and we act for debtor defendants seeking to dispute an alleged debt owed by them. Insolvency – we act for people and companies facing insolvency against bankruptcy trustees and liquidators. We also act for insolvency practitioners against people and companies facing insolvency. Construction Disputes – Stonegate Legal can assist in resolving all building and construction disputes, payment claims, subcontractors’ charges, and adjudications. Australian Consumer Law Disputes – ACL disputes including misleading and deceptive conduct, unconscionable conduct, and breaches of statutory warranties. Defamation – Advice and assistance in relation to legal action over publications which contain defamatory imputations and any defences to a defamation action. Partnership Disputes – Advising and assisting with partnership disputes and helping to reach a good resolution, or protect the client upon exit of the partnership. Lease Disputes – Advising and assisting on commercial lease disputes, residential tenancy disputes, retail shop lease disputes, breaches and unpaid rent recovery. Wills & Estates Litigation – We offer advice and assistance in relation to wills and estates litigation, and claiming against an estate making a family provision applications. Connect with Stonegate Legal Facebook -   / stonegatelegal   Twitter -   / stonegatelegal   LinkedIn -   / stonegate-legal-qld   Instagram -   / stonegatelegal   YouTube -    / @stonegatelegal   SoundCloud -   / user-913347920   Disclaimer: The content on this video and on our website is intended only to provide a general summary of information of interest. It is not intended to be comprehensive nor does it constitute legal advice. We attempt to ensure that the content is current but we do not guarantee its accuracy. You should seek legal or other professional advice before acting or relying on any of the content of this video or on our website. Your use of this video/website or the receipt of any information on this video/website is not intended to create nor does it create a client relationship. As a general rule, never get your legal advice from the Internet or YouTube.