Subsidiary Liability of the Parent Company for the Activities of Subsidiary Companies

Abstract

In contemporary legal systems, corporate group structures are recognized as an undeniable reality in the sphere of international commerce. Despite the separate legal personality of subsidiary companies, their independence has consistently been challenged by the influence and control exercised by parent companies. Accordingly, the present study seeks to answer the question of whether, and to what extent, a parent company may be held liable for the harmful acts or obligations of its subsidiaries. The research was conducted through a library-based (documentary) method, with data collected through note-taking techniques, and analyzed using a descriptive-analytical approach. The findings indicate that the concept of “subsidiary liability of the parent company” reflects a transition from the doctrine of absolute corporate separateness toward the recognition of a form of supervisory and controlling responsibility. In Iranian law, due to the absence of explicit statutory provisions, the analysis of such liability is primarily based on the general principles of civil liability and the doctrine of piercing the corporate veil. In contrast, English law, supported by a more extensive body of case law, holds parent companies accountable in specific circumstances where abuse of the corporate form or effective control is established. A comparison of the two legal systems demonstrates that the limited and purpose-oriented recognition of such liability contributes to economic justice and the effective protection of third parties. Therefore, the enactment of clear regulations within Iranian law to define the scope and criteria of this liability appears necessary.