When the subsidiary is insolvent, is the parent company's equity zero?

According to the company law and accounting standards, if the assets of the subsidiary are insufficient to pay off its debts during bankruptcy liquidation, the remaining debts can be passed on to the parent company. But this does not mean that the equity of the parent company will become zero.

In general, the parent company and the subsidiary company are independent legal entities, each of which bears its own debts. When a subsidiary goes bankrupt and liquidates, the court and liquidator will give priority to the distribution of creditor's rights according to the liquidation of assets. Generally speaking, creditors' claims will be paid off in legal order, including employees' wages, taxes, social insurance fees, suppliers' arrears and so on.

If the creditor's rights of the subsidiary cannot be fully paid off, the remaining debts can be borne by the parent company. In this way, the assets of the parent company will be reduced, but its rights and interests may not be reduced to zero, because the parent company may have other assets and income sources.

But the specific situation depends on the relevant laws and regulations, corporate governance structure and the specific arrangement of parent-subsidiary relationship. Therefore, under specific circumstances, it is necessary to further understand the relevant contracts, laws, articles of association and regulatory provisions in order to give specific answers.