A company becomes a parent company and establishes a subsidiary company, which can induce the externalization of risks. The parent company is only a shareholder and does not take any responsibility for the illegal activities of the subsidiary. It can be compared to that the public is not responsible for a large listed company that holds a single share. <br><br>A parent company now became simply a shareholder and was therefore, legally, no more responsible for the unlawful behavior of a subsidiary than would be a member of the public for the liabilities of a large public company in which he or she owned a single share.
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