liability limited-liability-company subsidiaries
In what circumstance would a holding company be legally liable if a subsidiary is sued or involved in an legal issues?
<p>In what circumstance would a holding company be legally liable if a subsidiary is sued or involved in an legal issues?</p>
<p>Lets say you have a holding company that holds 10 companies then one gets sued. Will that affect the other 9. Also in what circumstances can a holding company be sued?</p>

<p>One of the major reasons for having layers of companies like that is to take advantage of the <a href="https://elrlaw.com/legal-dictionary-corporate-shield/" rel="nofollow noreferrer">&quot;corporate veil&quot;</a>, or liability shield upward in the ownership structure.</p>
<p>The original concept related to sailing journeys to the New World. A dozen British citizen investors would get together and lease a ship and hire a crew to sale merchandise to the Americas. However, if the ship was lost, the lessor would go after all the investors for the loss - and in practice they only went after the richest investor while the others escaped.  That deterred wealthy investors from investing, which impeded enterprise, so the corporate veil was created.</p>
<p>Now, no investor was at risk for more than their voluntary investment.</p>
<p>Yours is the classic question (of the outsider): &quot;How can I <strong>pierce the corporate veil</strong> and make the rich investor personally liable <em>anyway</em>?  You can't - that is the entire point - unless the company has messed up.</p>
<ul>
<li>The company tried to do more activities/ventures than it could afford with the capital reserves or insurance it had.  Normally, this is described as <strong>&quot;failure to keep enough capital or insurance on-hand for its reasonable liabilities&quot;</strong>, but that only happened because the corporation attempted a business venture it couldn't afford.</li>
<li>Made a mess of its books and records, to the point where it was hard to tell who owned what, or which assets were the company's and which were shareholders'.</li>
<li>fail to file necessary government paperwork, fees and taxes.</li>
<li>Failed to act like a normal corporation: didn't pay dividends (if that is normal), or had no apparent reason to exist <em>except</em> to be a liability shield.*</li>
</ul>
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<p>* One of the vexations of asset protection is that a scheme can be pierced if it serves no purpose <em>except</em> to be asset protection.  See Atkisson &amp; Riser's book on the subject.</p>
