When a parent company is acquiring shares of another company, at what point does the parent company assume the legal liability of the child company?

For example, if a parent company acquires 100% of the shares of a child, it is vulnerable to any future lawsuits, debts, etc. However if the parent company only owns 0.1% than this probably is not the case.

My guess is that there are a set of rules (more than X% ownership, voting control, etc) that are defined in US law to determine if the parent company is de-facto acquiring the child company, and therefore assuming its liabilities.

2 Answer(s)


As on the Date of Acquisition if the Risk and Reward is Transfered to the Parent Company then the legal Obligations are to set to borne by the Parent Company.For More reference Please Refer to Comapanies Act 1956


are you asking from a legal point of view or from an accounting perspective?