Legal Liability of Parent Company on Subsidiary’s Bankruptcy in Indonesia

Abstract: This paper aims to know legal liability of parent company on subsidiaries’s bankruptcy in holding company. In holding company, parent company automatically controls the operation of subsidiaries. Parent company and subsidiaries stand independently and have their own by law as a regulation to comply with in respective companies. Subsidiary is legally responsible itself for doing its business activity. However, parent company has legal relation to subsidiary when parent company binds itself to an agreement entered into by the company and third party. Parent company is not responsible for legal deed done by subsidiary. Parent company can be accountable for any action taken by its subsidiary in an economic unity. When bankruptcy occurs in subsidiary, parent company should be responsible for the subsidiary’s legal deed in the case of Parent Company contributes to and signs the agreement entered into by the subsidiary and the third party in loan agreement between subsidiary as debtor and creditor. Parent company can have responsibility in the case of it acts as corporate Guarantee for loan agreement entered into by subsidiary between subsidiary as debtor and creditor. When the parent company becomes corporate guarantee, parent company is also responsible for debt-loan taken by the subsidiary.Keywords: Holding Company, Parent and Subsidiary Company, Legal Liability, Bankruptcy.