Does the head office need compensation when the subsidiary declares bankruptcy?

Legal analysis: when a subsidiary goes bankrupt, as long as the parent company fulfills its capital contribution obligations and responsibilities, the parent company will not bear the debt responsibility. Subsidiary and parent company are independent legal persons. As long as the parent company has completed its capital contribution according to law, it will only bear limited liability for the liabilities of its subsidiaries, so even if the subsidiaries go bankrupt, it will not require the parent company to make compensation. However, if the parent company has improper intervention or influence on the operating liabilities or asset losses of the subsidiary, it may need to bear the responsibility, including the senior management of the subsidiary.

When a company's investment in another company (enterprise) reaches holding, the company becomes the parent company and the controlled company (enterprise) becomes its subsidiary company (enterprise). This subsidiary (enterprise) has independent legal personality.

Legal basis: People's Republic of China (PRC) Company Law.

Article 14 A company may set up branches. The establishment of a branch company shall apply to the company registration authority for registration and obtain a business license. A branch company does not have legal person status, and its civil liability shall be borne by the company.

A company may set up subsidiaries, which have legal personality and independently bear civil liabilities according to law.

Article 15 A company may invest in other enterprises, but it shall not be jointly and severally liable for the debts of the invested enterprises unless otherwise provided by law.