Liability of Parent Companies on the Obligations of Subsidiary Limited Liability Companies in the German Law

Abstract

The German law on groups of companies has often been credited for its differentiated approach to concepts of liability within corporate groups. The relevant provisions of the German Stock Corporation Act of 1965 devise two categories of corporate groups — contractual and factual corporate groups — and apply different liability schemes to each of them. This Article explores some of the most important aspects of liability strategies within corporate groups in which the controlled subsidiary is not a stock corporation but a limited liability company. Part I and Part II summarize the principles of liability in the contractual and factual corporate groups respectively. The significant role of the German courts cannot be underestimated although court decisions are not officially acknowledged as a source of law. Part III analyzes the development of a separate legal doctrine and the change of liability strategy in the so called “qualified factual corporate group” since the recent decision of the Federal Supreme Court is considered to be either the abandonment of the elaborated doctrine and a sign of a new era of liability or just a modification of this doctrine regarding the liability of the only shareholder of the limited liability company. Taking into account some deficiencies of Russian statutory framework regulating the liability of parent companies, judicial decisions should be acknowledged as a further source of law provided that certain requirements are fulfilled.