Parent Company For The Subsidiary Action In Ethiopia Law

Abstract

Individual traders go through many stages of development, from a basic partnership to a more sophisticated one, and ultimately establish companies. This institutional innovation that gave rise to the idea of a firm was seen as a key player in the global shaping of human existence. Public corporations are a component of corporate groups, which are made up of numerous international affiliates. Ethiopia's New Commercial Law incorporated the rules governing group company structures. A parent company and subsidiaries are a group of companies made up of the parent company and all of its domestic and international subsidiaries, according to the new group company structure that was implemented in Ethiopia. That is playing a great role in attracting investment and securing the creditors of the subsidiary. In contrast to other nations, Ethiopia's recently enacted group business law governs group business structures without distinguishing between parent and subsidiary liability if subsidiaries inflict involuntary harm. Thus, the purpose of this study is to investigate the parent company for the subsidiary action in Ethiopian law. The legal framework and contemporary practices in Ethiopia regarding the parent company's liability for involuntary creditors of a subsidiary that are unable to satisfy their demands solely through the subsidiary's assets was debatable. The liabilities of the parent company in the case of involuntary damage of subsidiaries are restricted only in the wrongful trading practice. Comparative law and practice in different countries express that the parent company is liable for the debt of subsidiaries. In Ethiopia's New Commercial Code, there is no liability of the parent company for the debt of the subsidiary. There is a gap of law in the liabilities of the parent company in the case of action of subsidiaries. Therefore, the studies conclude and suggest that the new commercial code gap regarding to liabilities of parent company for the subsidiary actions in commercial activities as they are comparative to the other countries legislation, including the payment of involuntary damages in debt and tort cases involving subsidiaries