What is the Full Form of SUBS in Law?
The SUBS’s Full Form in Law Subsidiary. A subsidiary organization or firm is one in which all or the majority of the shares are owned by another, usually larger, corporation called the parent corporation. The parent company, as the subsidiary’s owner, has the authority to regulate its operations. This arrangement is not the same as a merger, wherein a business buys out another company and destroys the identity and organizational structure of the acquired company.
Different strategies and motivations might lead to the formation of subsidiaries. A corporation can establish a subsidiary by starting a new business or by acquiring a majority stake in an already-existing one. A subsidiary can be formed instead of a merger when a corporation buys an existing business since the parent firm can obtain control of the company with less money compared to a merger. Furthermore, unlike in a merger, the consent of the acquired company’s stockholders is not needed.
Additionally, companies establish subsidiaries with the express intent of reducing their liabilities in relation to a high-risk new venture. Both the parent and the subsidiary are still recognized as distinct legal entities, and each has independent obligations from the other. Nevertheless, creditors frequently sue the parent company if a subsidiary experiences financial instability. The parent company is usually shielded from financial liability for the liabilities of the subsidiary by the division of corporate identities, though courts may nonetheless hold the parent company accountable in certain situations.