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Group of Companies/Single Economic Entity

PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.

When a subsidiary in a group does something, what is the legal position of the holding company that owns it?

In some circumstances, the courts might hold the parent company responsible for the actions of the subsidiary – especially if the subsidiary does not conduct its business and make decisions independently of the parent company.

Where the companies constitute, in effect, a ‘single economic unit’, the courts may treat them as a single entity. The same reasoning applies where a joint venture is formed with two companies each owning a 50 per cent interest in the joint venture company.

That reasoning led to a failure by a large chemical company to avoid sanctions imposed by the European Court of Justice for a breach of EU competition law.

If you have concerns that the business practices of your competitors or your firm may be in breach of competition law, contact us for advice.

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