Is it inevitable that the parent company will go bankrupt and its subsidiary go bankrupt

If a parent company goes bankrupt, its subsidiary does not necessarily go bankrupt.

The relationship between the parent company and the subsidiary

1. The parent company is a "subsidiary" symmetry. Refers to a company that owns a majority of other companies** in the country or abroad. Companies under its control are called subsidiaries.

A subsidiary may also have its own subsidiary, which is a grandchild of the parent company. The parent company generally has more capital and strong economic strength, and can implement a high degree of centralized management of the subsidiary, and enjoy the decision-making power of the subsidiary's production and sales, capital raising, personnel arrangement, profit distribution and other major business activities. The parent company is mostly a monopoly organization, generally a holding company.

2. A subsidiary is a legal person enterprise of the host country established in accordance with the law by the parent company with all or part of the shares invested by the parent company in international business. The subsidiary is legally independent from the parent company and has an independent and complete corporate management organization system, so it has greater independence and certain flexibility in operation. At the same time, the business activities of the subsidiary should also be controlled by the parent company and subject to the needs of the parent company's overall strategy and overall interests.

But this control is indirect and is also positively correlated with the proportion of equity owned by the parent company.

3. The head office refers to the head office of an enterprise with the status of an independent legal person. It is the head organ of the subordinate branch and has the control over the production, sales, finance, and personnel of the branch. In China, the resident status of a company is determined by the location of the head office.

A company with its head office located in China is a resident company in China for tax purposes and bears unlimited tax liability for China; If the head office is a company located in China, it is not a resident company in China for tax purposes and only bears limited tax liability to China.

4. A branch refers to a branch that is under the jurisdiction of the head office in terms of business, capital, personnel, etc., but does not have legal personality. A branch is a branch of the head office, which has no legal and economic independence, and does not have the legal personality of an enterprise, but is only a subsidiary of the head office. The branch does not have its own name, articles of association, and its own property, and is legally responsible for the debts of the branch with the assets of the head office.

Hello, a subsidiary does not necessarily go bankrupt because the parent company goes bankrupt.

According to paragraph 2 of Article 14 of the Company Law, "a company may establish a subsidiary, which shall have the status of a legal person and independently bear civil liability in accordance with the law. The subsidiary has the status of an independent legal person, it has its own company name and articles of association, and conducts business activities in its own name, and its property is independent of the property of the parent company.

In terms of legal liability, the subsidiary and the parent company also bear their respective legal liabilities to the extent of their own property, and are not joint and several with each other. Although the parent company has control over its subsidiary, it is independent in terms of property liability, and the parent company only receives investment income from the subsidiary. The factor company has no obligation to pay off the debts of the parent company, and if the subsidiary is operating well, it will not be affected by the bankruptcy of the parent company; If the subsidiary is also insolvent and unable to repay its debts as they fall due, it may file for bankruptcy under the bankruptcy law.

Hope it helps.

Legal Analysis: Yes. The shares owned by the parent company in the subsidiary belong to the property of the parent company, and the shares need to be liquidated in bankruptcy, and the registered capital of the subsidiary will be affected after the liquidation of the shares. If there is a guarantee relationship, a loan relationship, etc., between the parent and subsidiary, it will also have a corresponding impact.

Legal basis: "Enterprise Bankruptcy Law of the People's Republic of China" Article 107 Where a people's court declares a debtor bankrupt in accordance with the provisions of this Law, it shall deliver it to the debtor and the administrator within 5 days from the date of making the ruling, and notify the known creditors within 10 days from the date of the ruling, and make a public announcement. After the debtor is declared bankrupt, the debtor is called the bankrupt, the debtor's property is called the bankruptcy estate, and the creditor's rights enjoyed by the people's court against the debtor when accepting the bankruptcy application are called bankruptcy claims.

The bankruptcy of the parent company does not mean that the subsidiary is also bankrupt. Although the subsidiary and the parent company have a controlling relationship, and the parent company is the legal person shareholder of the subsidiary, both are independent legal persons, both have independent legal person property, and both are liable to the outside world with their respective assets.

Article 14 of the Company Law of the People's Republic of China A company may establish a branch. To establish a branch, it is necessary to apply for registration with the company registration authority and obtain a business license. A branch office does not have legal personality, and its civil liability is borne by the company.

The company can set up a subsidiary, and the company has the status of a legal person and independently bears civil liability in accordance with the law. According to Article 74 of the Civil Code of the People's Republic of China, which came into effect on January 1, 2021, legal persons may establish branches in accordance with the law. Where laws and administrative regulations provide that branch offices shall be registered, follow those provisions.

If a branch engages in civil sales activities in its own name, the civil liability arising therefrom shall be borne by the legal person; It may also be borne by the property managed by the branch first, and if it is insufficient, it shall be borne by the legal person.

The bankruptcy of the parent company does not necessarily mean that the wholly-owned subsidiary will also go bankrupt, but if the subsidiary is affected by the bankruptcy of the parent company, it may lead to the bankruptcy of the subsidiary if it defaults on its debts.

The parent company and the subsidiary are independent legal entities, with independent assets and liabilities. The bankruptcy of the parent company does not directly lead to the bankruptcy of the wholly owned subsidiary. However, if a subsidiary provides a loan or guarantee to the parent company and the parent company becomes unable to repay it after bankruptcy, the subsidiary may suffer financial hardship and eventually go bankrupt.

In addition, if the bankruptcy of the parent company raises concerns about the creditworthiness of the subsidiary, the subsidiary may be forced to choose between creditors and shareholders, which may also lead to the bankruptcy of the subsidiary itself. Therefore, although the bankruptcy of the parent company does not necessarily mean that the wholly-owned subsidiary will also go bankrupt, if the subsidiary is affected by the bankruptcy of the parent company, it may become bankrupt if the subsidiary defaults on its debts.

If the subsidiary goes bankrupt, will the parent company be affected? If a subsidiary goes bankrupt, the parent company will not be directly affected because the parent company and the subsidiary are separate legal entities. However, if the bankruptcy of the subsidiary will have a significant impact on the parent company's main business or reputation, the parent company may be implicated or put under financial pressure.

The bankruptcy of the parent company does not necessarily mean that the wholly-owned subsidiary will also be born prematurely, but if the subsidiary is affected by the bankruptcy of the parent company, there may be bankruptcy when there are problems such as debt default. Although the parent company and the subsidiary are independent legal entities, they are still related to each other, and it is necessary to correctly handle each other's rights and obligations in the course of operation to avoid bankruptcy and other risks.

Legal basis]:

Article 24 of the Company Law of the People's Republic of China The relationship between companies shall be agreed in accordance with their respective articles of association or contract; Where there is no agreement or the agreement is not clear, the provisions of relevant laws and regulations shall be observed. The rights and obligations between the parent company and its wholly-owned subsidiaries shall be governed by the provisions of this Law on companies.

1. The bankruptcy of the parent company does not make the subsidiary bankrupt. The parent company and the subsidiary are independent legal persons. Although a subsidiary is under the actual control of the parent company and is subject to the management of the parent company in many respects, similar to the branches of the parent company, in law, the subsidiary is still a corporate enterprise with legal personality, has its own name and articles of association, and carries out business activities in its own name, and its property is independent of the property of the parent company, and each has its own balance sheet.

In terms of property liability, the subsidiary and the parent company also bear their respective property liabilities, and are not jointly and severally independent as independent legal persons, and the parent company and its subsidiaries shall independently enjoy civil rights and bear civil obligations in accordance with the law. The parent company can only use its own property as a bankruptcy estate. 2. According to Article 14 of the Company Law of the People's Republic of China, the company may set up a branch.

To set up a branch, it shall apply for registration with the registration authority of the Public Leasing and Infiltration Division and obtain a business license. A branch office does not have legal personality, and its civil liability is borne by the company. A company may set up a subsidiary, which has the status of a legal person and independently bears civil liability in accordance with the law.

Article 3 of the Company Law.

The company is an enterprise legal person, has independent legal person property, and enjoys the property rights of legal person. The company is liable for the debts of the company with all its property.

The shareholders of a limited liability company are liable to the company to the extent of their subscribed capital contributions; The shareholders of the shares are liable to the company to the extent of the shares they subscribe.

Article 5. The company engaged in business activities, must comply with laws and administrative regulations, abide by social morality, business ethics, honesty and trustworthiness, accept the supervision of the public and social responsibility. The legitimate rights and interests of the company are protected by law and are not infringed.