Also known as: subsidiary corporations · subsidiary
Written by attorneys · grounded in primary & secondary sources — see below
A corporation controlled by another corporation through ownership of a majority of its voting shares. Ownership of at least ninety percent of the voting power permits the parent to effect a merger without a vote of the subsidiary's shareholders.
Sterling Manufacturing owns ninety-two percent of the voting shares of Silverline Industries. Sterling approves a plan to merge Silverline into itself. Because the ownership threshold is met, the minority shareholders of Silverline receive no vote on the merger and are notified after the effective date.
Shaffer, a nonresident shareholder, sues a Delaware corporation and its wholly owned subsidiary in Delaware court. The subsidiary conducts business in Delaware. The court exercises jurisdiction over the parent because the subsidiary's activities are directed by and conducted for the parent's benefit.
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MercExchange obtains an injunction against eBay. eBay's wholly owned subsidiary continues the enjoined conduct. The court extends the injunction to the subsidiary because the parent controls all decisions and the subsidiary acts solely as the parent's instrumentality.
Basic Inc. issues statements about a potential merger. Its subsidiary, which holds key assets, remains silent. Investors sue both entities. The court treats the subsidiary's silence as part of the parent's disclosure duties because the parent controls the subsidiary's communications.
Upjohn's in-house counsel directs an investigation at a foreign subsidiary. Employees of the subsidiary provide information. The court holds the communications privileged because the parent controls the subsidiary and the investigation serves the parent's legal interests.
The NRC issues a rule governing nuclear plant operations. Vermont Yankee's wholly owned subsidiary operates a plant subject to the rule. The court reviews the rule under the arbitrary-and-capricious standard because the parent and subsidiary are treated as a single regulated entity.
A parent that owns shares carrying at least ninety percent of the voting power of each class and series of the subsidiary may merge the subsidiary without a shareholder vote under Model Business Corporation Act section 11.05(a).
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No. Jurisdiction over a subsidiary does not automatically confer jurisdiction over the parent even when the parent owns all the subsidiary's stock, unless the parent controls the subsidiary or the subsidiary acts at the parent's direction.
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A parent that dominates its subsidiary owes fiduciary duties to the subsidiary and its minority shareholders and must prove entire fairness in self-dealing transactions.
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…during any questioning if the defendant so desires. The presence of counsel at the interrogation may serve several significant subsidiary functions as well. If the accused decides to talk to his interrogators, the assistance of counsel can mitigate the dangers of untrustworthiness. With a lawyer present the likelihood that…