A Third Wheel No Longer: Board Obligations in Light of Expanded Parent Company Duties
In Chandler v. Cape plc, the English Court of Appeal imposed a direct duty of care on a parent company for tortious harms committed by its subsidiary. While some speculated that the decision was an anomaly, a recent series of cases both in Canada and the UK are building upon Chandler to argue that parent companies owe duties of care to third parties. If this reasoning is accepted—and early decisions suggest that courts will accept it in certain scenarios—parent companies will become liable for acts of their subsidiaries that create foreseeable risks to third parties.
While this expanded duty is a welcome development to tort victims who may otherwise be left without recourse, the duty raises new roles and responsibilities for boards of directors of parent companies. Drawing from the law and practices of anti-corruption, where obligations of parent companies boards for the acts of their subsidiaries are well delineated, this paper examines the novel obligations parent company boards may face.