Dear Members,
Why Domestic Companies forms Subsidiaries having same business ?
1 Replies
CS Mitesh Mehta
(Company Secretary)
(17139 Points)
Replied 04 July 2012
Corporations that operate in more than one country often find it useful or necessary to create subsidiaries. For example, a multinational corporation may create a subsidiary in a country to obtain favorable tax treatment, or a country may require multinational corporations to establish local subsidiaries in order to do business there.
Corporations also create subsidiaries for the specific purpose of limiting their liability in connection with a risky business. The parent and subsidiary remain separate legal entities, and the obligations of one are separate from those of the other. Nevertheless, if a subsidiary becomes financially insecure, the parent corporation is often sued by creditors. In some instances courts will hold the parent corporation liable, but generally the separation of corporate identities immunizes the parent corporation from financial responsibility for the subsidiary's liabilities.
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