How to structure the transfer of a failing subsidiary to a third party
A recent judgement of the Compiègne Commercial Tribunal (dated 23 February 2018) warns caution regarding how to structure the transfer of a failing subsidiary to a third party.
In this case, which relates to the well-known group Electrolux , the Tribunal concludes that the subsidiary to which a loss-making business has been contributed was artificially set-up and sees nothing but the setting-up of a “bad company” (similar to a bad bank).
The Tribunal reaches the logical conclusion that the bankruptcy of the subsidiary should be extended to the parent, irrespective of the fact that the subsidiary was transferred to a third party as part of the restructuring prior to its filing for bankruptcy.
An appeal was lodged against this judgement, the outcome of which is eagerly awaited.