Flow of information in capital groups

Our experience shows that holding companies very often receive, in various form, information from their subsidiaries. Such information is transferred for numerous purposes, including management (also as part of services subject to transfer pricing) or stock exchange reporting, usually without due analysis whether or not such a transfer infringes upon absolutely binding provisions of law or violates rights of the subsidiaries’ (minority) shareholders or contractors.

Moreover, such a situation generates conflict of interest for the subsidiary’s management board that is required on the one hand to keep secret particulars of the company it represents, and on the other hand – to transfer vital information to its parent company.

In such circumstances, the following risks occur:

  • reluctance of members of the subsidiaries’ management boards to immediately provide the holding company with all vital information about the subsidiary (which is of importance particularly for holding companies that are required to report information significant for the stock exchange),
  • exposure to an allegation that members of the subsidiaries’ management boards are made to engage in illegal actions,
  • exposure to claims from the subsidiaries’ contractors in the event of disclosure of information about such contractors to a third party, which in relation to them is the holding company,
  • exposure to claims from the subsidiaries’ (minority) shareholders (if any).