Can someone sue a holding company?

Separate legal entities

The law treats holding companies and their subsidiaries as separate legal entities, each responsible for the management of that business, including separate finance, management, recruitment etc. As each is a separate entity, then one company, including the parent, cannot be held liable for the debts of another company within the group.

Exceptions when the corporate veil is lifted

This separation of the legal entities is commonly referred to as the “corporate veil”. There are some instances when a court may lift this veil and hold the parent company liable for the actions of a subsidiary.

These instances normally relate to circumstances where there has been fraud committed, such as the improper transfer of assets or shares and other fraudulent means to avoid the subsidiary company’s liabilities, or impropriety in the duty of care.

Judgments for money

However, in the case of a judgment against a subsidiary, it is highly unlikely that the court would allow the lifting of the corporate veil for the claimant to pursue their claim against a parent without substantial evidence that fraud had been committed or that subsidiaries had been set up as a fraudulent façade to hide assets from the creditor.

Unfortunately, if the debtor company with which the creditor had the contract is unable to pay, in almost every case there is no further option. Our office can effectively address any legal questions about holding companies. If you have any questions, please fill out the following form below and a Business Lawyer from our office will get back to you.