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

Nordic & European Company Law Working Paper No. 19-05

Forthcoming European Business Organization Law Review

38 Pages Posted: 2 Dec 2019 Last revised: 7 Jan 2021

See all articles by Karsten Engsig Sørensen

Karsten Engsig Sørensen

Aarhus University – Aarhus BSS, Department of Law

Date Written: Revised January 4, 2021

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 on what duties parent companies have vis-à-vis their subsidiaries. It its 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 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 that subsidiaries are 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.

Keywords: group governance, parent companies

JEL Classification: K22

Suggested Citation

Sørensen, Karsten Engsig, The Legal Position of Parent Companies: A Top-Down Focus on Group Governance (Revised January 4, 2021). Nordic & European Company Law Working Paper No. 19-05, Forthcoming European Business Organization Law Review, Available at SSRN: https://ssrn.com/abstract=3495023 or http://dx.doi.org/10.2139/ssrn.3495023

Karsten Engsig Sørensen (Contact Author)

Aarhus University – Aarhus BSS, Department of Law ( email )

Bartholins Allé 16, Building 1410, Room 246
DK-8000 Aarhus C
Denmark

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