How feasible is to extend the liability from the subsidary to the parent company on a duty of care assumption?

Abstract

In the aim of not hindering the business development, courts have established an essential principle that could be described as a cornerstone in company law, the limited liability of each separate personality. This paper examined the crucial benefits of the limited liability in its economic boosting function where companies can shield assets from risk taking operations. Thus, create incentives for said companies to engage more in risk taking and accelerate the economic advancement. Nonetheless, this paper included that this liability needs to be extended. Since this excessive risk-taking behavior will result in an increased number of uncompensated victims. This notion becomes severe when a group of company uses this principle to shield itself from an oversee risk exposure created from its subsidiary’s activities. Accordingly, the duty of care assumption is a tort tool that could be utilised to extend the liability. When compared to other tools, duty of care appears to be preferred by courts. In the aim of reaching this conclusion, this paper examined the judicial duty of care testing method. The argument that this paper is putting forward is that extending the liability from the subsidiary to the parent company on the basis of duty of care owed by the later towards tort victims, is the most likely tool to become successful. However, its current form needs refining as it faces serious issues, mainly in its testing ambiguity and not treating third party the same as the subsidiary’s employees in terms of the tool tests.