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What might happen if subsidiary is sued

In the scenario that a subsidiary is sued and is owed money from the parent.

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I am considering the scenario where a subsidiary is sued (fairly substantial amounts) following non performance of a contract.

The subsidiary is owed a considerable amount by the parent company.

If the amount payable following the legal action is greater than the assets of the sub, could a liquidator (or some other party) pursue the parent for it's available assets too?

(am regular poster etc - thanks)

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By johngroganjga
23rd Oct 2019 12:53

Yes of course, but only up to the lower of the amount of the loan and the shortfall needed to pay the subsidiary’s creditors.

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Replying to johngroganjga:
Lisa Thomas
By Insolvency Practitioner
23rd Oct 2019 16:09

...and the Liquidation costs...!

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By johngroganjga
23rd Oct 2019 16:46

That’s part of the shortfall.

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Hallerud at Easter
By DJKL
23rd Oct 2019 13:01

Is a dividend from sub to parent worth considering?

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By paul.benny
23rd Oct 2019 13:26

Good idea but I think I'd want legal confirmation that this couldn't be clawed back.

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By Tax Dragon
23rd Oct 2019 14:52

Presumably amounts derived from previous dividends may similarly be at risk?

IANAL and this is all legal stuff.

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By bernard michael
23rd Oct 2019 14:04

Yes !!!

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Hallerud at Easter
By DJKL
23rd Oct 2019 15:10

Well the key re dividends is likely, has it actually received notice of the action and if appropriate provision were to be made would a dividend still be possible?

If, as you say. large sums then certainly one for a solicitor. Having said that we are on the other side of one of these with a tenant who has ripped £150k out of his company and is now pleading poverty paying circa £60k-£80k roof repairs which whilst not ascertained re sum were known to be pending- hate to say we are not going down the legal route, enough experience to know these sorts of things are really difficult to prove and usually just have costs but no return, however if the sum at stake were say £250k I would possibly fear the other side pursuing matters more vigorously.

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