Replies to post #99761 on Expo Holdings Inc. (EXPH)

[AStTropaz]

SBB, one of strongest arguments EXPO could provide in separating D&D is also one of its' greatest weakness.

What Legal Risks Are Likely In The Parent/Subsidiary Relationship?

A parent corporation may hold its subsidiary accountable for the expectations of its board of directors. And, this is the purpose of the parent's control of its subsidiary: to hold it accountable for performance. As long as the parent permits the subsidiary to act independently under the direction of its board, there is little risk to the parent of being found liable for the negligence or wrong-doing of the subsidiary. After all, the parent in a parent/subsidiary relationship is merely a stockholder, and the law is clear that a stockholder is not liable for the actions, debts, or obligations of the corporation.

However, if the parent exercises excessive control over the subsidiary by, e.g., commingling funds, interchanging employees, having its board serve as the board of the subsidiary, sharing office facilities, using a common letterhead, and otherwise blurring the distinctions between the parent and the subsidiary as separate independent corporations, then each corporation is at risk for the unfunded liabilities of the other under the legal doctrine of "alter ego." Under this doctrine, a litigant may "pierce the corporate veil" of the subsidiary corporation and reach the assets of the parent corporation under the theory that the two corporations, for legal liability purposes, are not two independent corporations, but are but one corporation in fact. In this way, the litigant may seek payment of an unfunded liability of one corporation from another corporation. It must be noted, however, that a litigant pursuing an alter ego theory of liability has an uphill fight. Courts are not likely to permit a litigant to "pierce the corporate veil" of a corporation and reach the assets of its parent shareholder, unless it is abundantly clear that the two corporations were indistinguishable as separate corporate entities and are operating as one corporation.
http://www.t-tlaw.com/cor-02.htm