Parent Company Liability for Damages Caused to Third Parties by Subsidiaries
Keywords:
Subsidiaries, Parent Companies, Iranian Law, English Law, LiabilityAbstract
In the business world, parent companies often establish subsidiaries to benefit from various advantages such as investment diversification and efficient management. However, this complex structure can sometimes lead to potential abuses. Parent companies may exploit the legal independence of subsidiaries to conceal unlawful activities or evade their own responsibilities. Consequently, determining the liability of a parent company for the actions of its subsidiaries is of vital importance. The present study aims to answer the question: Are parent companies liable for the actions of their subsidiaries under Iranian and English law? The research is conducted using a library-based (documentary) method, with data collection through note-taking and analysis carried out using a descriptive-analytical approach. The findings indicate that under English law, which is based on the common law system, the general principle is that the parent company holds primary liability. However, in certain exceptional cases, this liability may extend beyond the parent company. These exceptions include situations where the subsidiary, shareholders, or directors may be held accountable for their actions despite legal limitations. In Iranian law as well, invoking the principle of “he who enjoys the benefits must also bear the burdens” (man lahu al-ghunm fa-‘alayhi al-ghurm), the notion is reinforced that the parent company primarily bears responsibility. Nevertheless, under specific conditions, this liability can be extended to other related parties as well.
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