Personal Bankruptcy Lawyer Payson Utah
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What Happens to the Subsidiaries If the Parent Company Goes Bankrupt?
There are several scenarios in which a subsidiary will be a victim of bankruptcy. They include Unknown interference, protection from creditors, and consolidation. Then, there are also legal issues that need to be addressed. Article 190 of the 2014 Law on Enterprises (LOE) provides a process for creditors to examine the parent company for liabilities and seek compensation.
Unknown interference
When a parent company goes bankrupt, a subsidiary company can sue for tortious interference. This action occurs when the parent company interferes with the contractual relationship between a subsidiary company and its customer. The parent company may not intervene without the consent of the subsidiary and must act in the subsidiary’s economic interest.
However, it is hard to win a case against a parent company when a subsidiary goes bankrupt. This is because the law recognizes the parent company as a separate legal entity and the subsidiary will be bound by its liabilities for all assets registered in its name. However, in some cases, it is possible to obtain compensation from a parent company if the interference undermined the subsidiary’s independence or contributed to the bankruptcy of the subsidiary.
Protection from creditors
The current Vietnamese bankruptcy laws do not protect creditors from abuse by bankrupt subsidiaries. As bankruptcy has become more common in Vietnam, it has become a pressing matter to create a legal mechanism to protect creditors. Such a mechanism will help foster a healthy business environment. However, it is not an easy task.
The process begins when the parent company files a bankruptcy petition with the federal court. The company then negotiates with its creditors to restructure its debt and reduce the amount owed. Once all the parties agree on a plan, the bankruptcy court must accept it. Once the plan is approved, the subsidiary company can continue its operations.
Consolidation
There are a number of reasons why a parent company should consolidate its subsidiaries. One of them is to provide better value to shareholders. A parent may be a majority shareholder, a priority debt holder, or the sole creditor of the subsidiary. In other cases, a parent may negotiate a prepackaged bankruptcy with the other creditors. This usually takes less than a year and allows the majority shareholder to retain voting control.
The bankruptcy treatment of a parent and a subsidiary depends on the jurisdiction of the Court. If the parent company is still in business, the bankrupt subsidiary may be treated as discontinued operations. This means that the parent would remeasure its noncontrolling investment at fair value if the subsidiary went bankrupt.
Protection from creditors for a nonbankrupt subsidiary with a nonbankrupt parent
In Vietnam, the current bankruptcy law protects creditors from abuses by the parent company, but not from those of the subsidiary. This is a major concern, especially as bankruptcy has become increasingly common in the country. The question of how to separate the parent company’s liabilities from those of the subsidiary has always been a concern. But with the recent adoption of bankruptcy laws, it is becoming more important than ever to develop a mechanism that protects creditors and ensures a healthy business environment.
One of the main challenges facing creditors in obtaining protection from nonbankrupt subsidiaries is that the majority of these creditors are “outsiders.” They do not know what the subsidiary has been doing or what specific damage it has suffered. Therefore, creditors must trace back their involvement to the parent company to make their case.
If you have any questions, you can get a free consultation with Ascent Law LLC:
Ascent Law LLC:
8833 South Redwood RoadSuite C
West Jordan, UT 84088
(801) 676-5506
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https://www.ascentlawfirm.com/bankruptcy-lawyer/
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Payson, Utah
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Payson, Utah
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City
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Peteetneet Museum in Payson
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Location in Utah County and the state of Utah
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| Coordinates: 40°2′20″N 111°43′59″WCoordinates: 40°2′20″N 111°43′59″W | |
| Country | United States |
| State | Utah |
| County | Utah |
| Founded | October 20, 1850 |
| Incorporated | January 21, 1853 |
| Named for | Payson, Adams County, IL |
| Government
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| • Mayor | Willam Wright |
| Area
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| • Total | 13.05 sq mi (33.81 km2) |
| • Land | 13.04 sq mi (33.78 km2) |
| • Water | 0.01 sq mi (0.02 km2) |
| Elevation
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4,700 ft (1,418 m) |
| Population
(2020)
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| • Total | 21,101 |
| • Density | 1,618.17/sq mi (624.66/km2) |
| Time zone | UTC-7 (Mountain) |
| • Summer (DST) | UTC-6 (Mountain) |
| ZIP code |
84651
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| Area code(s) | 385, 801 |
| FIPS code | 49-58730[1] |
| GNIS feature ID | 1444252[2] |
| Website | http://www.paysonutah.org |
Payson is a city in Utah County, Utah, United States. It is part of the Provo–Orem Metropolitan Statistical Area. The population was 21,101 at the 2020 census.[3]
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What happens to the subsidiaries, if it’s parent company goes bankrupt?https://t.co/2PKKYSPBs8 pic.twitter.com/RvtOPH7kUT
— Jan Meriss Alfonso (@MerissJan) November 3, 2022
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