On The Responsibility Of Directors Of The Parent Company

Taking the objective reality of the operational model of parent-subsidiary companies which is an economic phenomenon existing universally in the contemporary world into our consideration, as we know, the parent/subsidiary companies are independent judicial entities in law. But because of their control and being controlled relationship, there might be more problems in this kind of corporations. Parent company always uses its economic advantage to control subsidiary company and affect the subsidiary company ordinary affairs.In our country, the mode of parent-subsidiary companies are just in the beginning, but this mode has already showed us its advantage. This legislation sets a regulation for the parent-subsidiary companies in our country, but that regulation lacks detailed rules about how to protect the interest of the subsidiary company and its few shareholders, and also can't protect the interest of the creditors. Since the sub-branches are not an independence entity, if the branch have some problems, the main company will bear the burden; on the contrary, the mode of parents-subsidiary is different, the subsidiary company has corporation qualification, if it bankrupt, the parent company is only responsible for the investment, because the subsidiary company is independent from the parent company. Since the parent company and the subsidiary company are independent from each other, if the parent company makes the subsidiary company lost its independence, the subsidiary company will become the tool of the parent company. It is harmful to the creditor. For resolving these questions, we must restrict the power of parent company; protect the benefit of the subsidiary company and its few shareholders also the creditors by legislation.Six issues are discussed in this article. The first issue falls into an overall survey. The second and third issues are about the role and ability of director. And the fourth part is about the legal definition of parent-subsidiary companies. The fifth party is about the duties and liabilities of parent company's director in Japan. The sixth part introduces the rules in other countries. The last part introduces the current issues and legal trend and some suggestions about this question.