Liability of the Parent Company of MNEs for the Debts of Its Subsidiaries

Abstract

In the context of today's global economic development environment, the most basic and widely adopted internal organizational structure of multinational companies, as the most important economic entities in the process of continuous expansion, is in the form of parent and subsidiary companies. Under this structure, the parent and subsidiary of a multinational corporation are legally separate legal persons, while in practice the subsidiary is often under the integrated control of the foreign parent company based on the global strategy. The contradiction between this form of law and physical control makes it highly likely that MNEs will pursue their global strategies while circumventing their legal responsibilities and infringing on the interests of subsidiaries, their creditors, and even the host country. Therefore, how to deny the independent legal personality of the subsidiary in a timely manner, so that the parent company of the multinational company can bear the debt liability of the subsidiary in a specific situation, deserves in-depth study. China has not made a limited principle exception to the issue of the liability of the parent and subsidiary of multinational companies under specific circumstances so in practice, some multinational companies maliciously take advantage of the gap in China's legal system to avoid liability. Therefore, through the in-depth discussion of the principle of responsibility and the comparative study of the time of various countries, China should formulate relevant legal systems in line with China's national conditions and the current world economic situation as soon as possible, so as to effectively regulate the behavior between the parent and subsidiary companies of multinational corporations and better protect the legitimate interests of multinational subsidiaries and their creditors in China.