ABSTRACT

Subsidiary companies are not inherently nefarious. On the contrary, subsidiaries may serve perfectly legitimate functions. In most instances, subsidiaries are indeed legitimately used.

Unfortunately, however, the holding-subsidiary arrangement does increase the risks of abuse and unfairness.1 These risks are particularly heightened where the subsidiary acts not in the interests of its own corporate enterprise, but in the wider interests of the holding company, or of one or more affiliated companies, or o f the group as a whole. In this type of situation, the subsidiary is not allowed to operate as an independent profitcentre. Its interests are submerged, or at least ignored, in the greater interest o f the group enterprise. Such subservient behaviour is usually the result of dominating control exercised by the holding company over the subsidiary.