Legal impacts from the bankruptcy of subsidiary company to holding company as the corporate guarantor

Abstract

The existence of competition in business fields demands entrepreneurs to develop strategies to make their company able to compete with other company. One of the ways is by establishing company group in the form of holding company and subsidiary company. In the development of the business, a company will need funding as their capital. This capital will be obtained from internal or external parties resulting debts or account receivable to the creditor. It creates a risk of bad debts in the future. Therefore, creditor will commonly require a guarantee, called as corporate guarantee. In this case, holding company can become a corporate guarantor. Nevertheless, it is still going to create problem to the legal impact of holding company as the guarantor in case if the subsidiaries experience bankruptcy. This research aims to explore and analyze the legal impact from subsidiary company's bankruptcy to holding company as the corporate guarantor. This research used socio-legal approach. That is to say, this research reviews norms of law by doing literature research to get the secondary data and fields study to obtain the primary data regarding the legal impact of the bankruptcy of subsidiary company to holding company as the guarantor. The methods of collecting the data were by literature studies and interview. The interview was done to the informants, like judge and experts of corporate law and guarantee. The technique of data validity used triangulation of sources or methods. The used theory and concept was for the analysis of loan agreement, bankruptcy, corporate guarantee, and group company.