Best Practices in Corporate Subsidiary Management

by Practical Law Corporate & Securities

A Practice Note that provides guidance on best practices and key action items for corporate counsel responsible for the legal oversight of a corporation's subsidiaries. It addresses the entire lifecycle of a subsidiary, covering its creation, ongoing maintenance, and eventual dissolution. A central theme is the importance of maintaining distinct corporate identities and observing corporate formalities to mitigate the risk of a court piercing the corporate veil, which would expose a parent company to its subsidiary's liabilities. This Practice Note discusses establishing company-wide processes, such as delegation of authority policies and information management systems, to ensure central control and proper governance. It also covers essential considerations for drafting organizational documents, capitalizing subsidiaries, and managing non-US entities.