Legal analysis
Under normal circumstances, the parent company and its subsidiaries are legally independent legal entities established through the principle of limited liability, and they do not bear legal responsibilities for each other. If the parent company's capital contribution is not in place or the parent company and the subsidiary company agree to bear joint and several liability for the debts of the subsidiary company, they may need to bear joint and several liability. A subsidiary is an independent company, and its business activities have nothing to do with the parent company. When a subsidiary goes bankrupt, as long as the parent company is not confused with the subsidiary company, the parent company will only bear limited liability for the company's debts to the extent of its subscribed capital contribution. 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. A wholly-owned subsidiary refers to a company with only one corporate shareholders. That is, the parent company controls all the shares of its subsidiaries. The parent company and its subsidiaries are independent enterprise legal persons in legal status and can independently participate in foreign business activities. The parent company is either wholly-owned or the subsidiary has a majority stake. The wholly-owned subsidiary is a special case in the process of reform and opening up in China and China.
legal ground
Company Law of the People's Republic of China
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 3 A company is an enterprise legal person, which has independent legal person property and enjoys legal person property rights. The company is liable for its debts with all its property. Shareholders of a limited liability company shall be liable to the company to the extent of their subscribed capital contribution; Shareholders of a joint stock limited company shall be liable to the company to the extent of the shares subscribed by them.