Q&As

Is a parent company able to wind up its subsidiary? If so, what happens to any trading contracts and arrangements on the winding up?

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Published by a LexisNexis Banking & Finance expert
Published on: 06 December 2017
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Because we are not privy to the background of this particular situation, and it is not clear if this is a solvent or insolvent liquidation, or what role the parent plays with the subsidiary, we have kept this Q&A wide to cover a spectrum of possible scenarios. Our research therefore covers: all situations where a winding up might be possible, including by a creditor or by the company when the subsidiary is insolvent, or if the subsidiary is solvent then via a members’ voluntary liquidation (MVL). In addition, the terms of the articles of the subsidiary should be consulted.

In what circumstances can a company be wound up and by whom?

Voluntary winding up by the company or directors

For information on who can wind up a company voluntarily, and how, see Practice Note: Creditors' voluntary liquidation—circumstances in which an insolvent company may be wound up voluntarily.

Voluntary winding up is initiated by the company itself without

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Jurisdiction(s):
United Kingdom
Key definition:
Subsidiary definition
What does Subsidiary mean?

There are two suggested definitions for the term 'subsidiary', as commonly used in agreements. CA 2006, s 1159 provides that a company is a holding company of another company (its subsidiary) if it satisfies one of three tests, two of which require it to be a member of the other company (as well as to possess certain rights, which go to its voting powers). Membership of a company is a question of fact and the court has found that if a company (company A) has transferred shares in another company (company B) to a lender in connection with the taking of security and the name of that lender or the lender’s nominee has been entered in the register of members, then company A is not a member of company B in respect of those shares: see Enviroco Ltd v Farstad Supply A/S.

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