German corporate group law is characterized by the principle of the legal independence of group companies. Nevertheless, the question repeatedly arises as to what extent the parent company is liable for tortious breaches of duty by its subsidiaries. This question has significant practical implications for corporate group organization and risk management. The following article provides an overview of the corporate law foundations, the grounds for the parent company’s liability, and its limitations.
The Supreme Tax Court has held that an Organschaft parent must be an active business by the effective date of the first profit surrender, i.e. the first year end of the subsidiary. It also held that the provision allowing profit pooling agreements with formally inadequate loss subvention provisions to be corrected by December 31, 2014 applies to all agreements existing on February 26, 2013 regardless of the nature of the inadequacy.
