Parent Company Liability for Losses Caused to Third Parties by Subsidiaries

Abstract

In the business world, parent companies establish subsidiaries due to numerous advantages, such as investment diversification and efficient management. However, sometimes this complex structure can lead to possible abuses. Parent companies may use the legal independence of subsidiaries to hide illegal activities or evade their responsibilities. For this reason, determining the parent company's liability for the actions of subsidiaries is crucial. Therefore, the purpose of the present study is to answer the question: Are parent companies liable for the actions taken by subsidiaries in Iranian and English law? The method of analysis is library (documentary) and the tool is in the form of a receipt, and the method of analysis is descriptive-analytical. The results showed that in English law, which is based on common law, the principle is that the parent company bears the main responsibility. However, in some exceptional cases, this liability may extend beyond the parent company. These exceptions include cases where a subsidiary, shareholders, or directors, despite legal restrictions, may be held liable for their actions. In Iranian law, too, citing the principle of man la al-ghanam ali al-ghurm, the concept is reinforced that the parent company is primarily liable, but in certain circumstances, this liability can be extended to other related parties.