Abstract:
The parent-subsidiary arrangement does increase the risks of abuse and unfairness. In practice, the affairs of companies in a group are often conducted by various transfer pricing techniques, the diversion of corporate opportunities, the commingling and draining of assets, the shuttling of funds and other assets, the provision of financial support by the subsidiary to other components of the group and the operation of the subsidiary without a profit motive. In so far as external creditors are concerned, these abusive and unfair practices lead to a reduction both in profitability and in the net asset value of the subsidiary and even lead to the subsidiary's insolvency. Especially where the subsidiary is insolvent, external creditors are clearly prejudiced.The objective of this thesis is to study the imposition of liability on the parent company for the debts of its insolvent subsidiaries. The results of this study are as follows:1. Group activity in the sense of the conduct of various business by a parent company through a number of subsidiaries is a 20th century phenomenon. Unfortunately, Thai law, still based on the 19th century notion of the "single company" enterprise, has not adapted well to the challenge of dealing with the various issues raised by the group phenomenon.2. The English and American legal measures to cope with the abusive and unfair practices by the parent company offer considerable guidance in the imposition of liability on the parent company for the debts of its subsidiaries. Without affecting the advantages of corporate group organization and the benefits of separate corporate personality and limited liability, Thai Bankruptcy Act should be revised to include the imposition of liability on the parent company on the basis of the English wrongful trading incorporated in section 214 of the Insolvency Act 1986. Moreover, Thai courts should adapt the English and American court's decisions and apply them to deal with the various issues raised by the parent company's abusive and unfair practices.