Urgent Query - Holding company and 100% subsidiary company

As it is rightly said that a holding company has a deep interest in it's subsidiary, since the loan taken by the subsidiary company was borrowed for business purpose ,then it becomes quite obvious that the bank can approach the holding company incase of loan default made by the subsidiary company.

Holding company will be liable only if the holding company had guaranteed the loan as a guarantor. As a shareholder the holding company is not directly responsible as both the companies are separate legal person.

If holding company have guaranted laon as guarantor holding company is liable for loane due amount.Bank can recover loan due amount from B ltd.

In case holding company does not guaranteed the loan to 100% subsidiary then what will be the implications.

Please also quote case law reference if you have any.

Dear Somani,

Existance of company is seperate from its shareholders. Holding company will never be responsible/ liable for the debts of its subsidiary company.

Cs. Anjani Kumar

I agree with the views of Anjani Kumar.  Holding co. and subsidiry co. are two different legal entities and bank cannot take action against the holding co. directly for default of subsiairy co. unless the holding co. had given corporate guarantee.

Granting or taking a loan is the result of contract and in that circumstances only the party to the agreement is liable not the other. The Holding Company has got sepaarte legal existence from the borrower for all practical purposes.

I agree with all the above made replies as it is a very important law that every company holds separate and Individual legal identity.. even though the holding company has 100% of the subsidary company cannot be held liable for the acts done by the subsidary company.. the subsidary company is purely and individually liable for the acts, whether in the nature of civil, criminal or any other present laws prevailing in India, done by self.
 

Here a major emphasis has been raised on the Holding Company having 100% in the Subsidary Company.. Based on my knowledge in this particular subject the Holding Company shall be treated as the shareholder in the Subsidary Company and will be having rights as a normal individual shareholder in the Subsidary Company.