Can You File a Claim Against a Parent Company of a Subsidiary?

One of the reasons parent companies form subsidiaries is to protect themselves from liability. If you have a complaint against a subsidiary, you have to examine the parent/subsidiary legal relationship to determine the options you have available to you. Much depends on the types of legal entities involved--whether corporations or limited liability companies, for example. Much also depends upon what actual pesons did the wrong.

  1. Parent/Subsidiary not Parent/Child

    • One mistake litigants make is to assume that a parent company is repsonsible for the subsidiary the way a parent is responsible for a child's actions. In fact, a true subsidiary is independent of the parent for legal purposes, and must be treated like a separate company when legal disputes arise.

    Alter Ego

    • If a parent company and its subsidiary share offices, letterhead and a board of directors, a litigant can make the case that the subsidiary is an alter ego, not a separte company. In such a case, the courts may allow you to pursue the parent company's assets in order to satisfy your claim.

    Conduit of Responsibility

    • If you can show that the wrong perpetrated by a subsidiary can be traced back through the actions and decisions of personnel from the parent company, you may be able to pursue parent company assets. In this case, your suit does not hinge upon the definitions of the legal entities involved, but on the actions of employees. If some of those employees belong to the parent company, then the parent company may be liable.

    Limited Liability Company as Subsidiary

    • When a company forms a subsidiary as a limited liability company, it lists itself as a member of the LLC. If it is the only member, a litigant can claim that the LLC is actually an alter ego of the member. In addition, the member-parent can still be liable for LLC actions if you can show that employees of the parent company are responsible for the wrong done to you.

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