Paying the debts of a subsidiary

My UK-based company has overseas subsidiaries. One recently went bust .The subsidiary was involved in a case and was ordered to pay compensation to a former employee. As it went bust the compensation wasn’t paid. The former employee is now looking to take action against us in the UK stating that we are responsible for the subsidiary. Can he do this?

There are two separate business entities in the UK and abroad

Each company has its own distinct legal personality. This means that each is solely responsible for its own actions. Therefore, any liability incurred is limited to that company.

The UK courts will only look behind the legal personality of a company in exceptional circumstances. The former employee will have to prove to the court that the overseas company was merely a façade. This is highly unlikely so you should be OK.

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