Separate legal personality is the starting point
Each company in a group has its own legal personality, its own assets, and its own liabilities. A parent that owns a subsidiary is not, by that fact alone, liable for the subsidiary's contracts or debts.
So if you contract with the subsidiary, the subsidiary is your counterparty, and the subsidiary's balance sheet is what stands behind the deal. Ownership higher up the group does not change that by itself.
What Vedanta actually decided
Vedanta Resources Plc v Lungowe [2019] UKSC 20 confirmed that a parent can owe a direct duty of care to third parties harmed by a subsidiary's activities, where the parent intervened sufficiently in how the subsidiary managed those activities.
This is not piercing the corporate veil, and it is not contractual liability for the subsidiary's deals. It is the parent owing its own duty in tort, based on the control it actually exercised. Okpabi v Royal Dutch Shell Plc [2021] UKSC 3 allowed similar claims against a UK parent over a Nigerian subsidiary's operations to proceed on the same principle.
When control creates parent risk
The risk rises with the degree of real intervention. Common factors include group-wide policies and standards imposed on the subsidiary (especially on safety, ESG, or compliance), vertical reporting lines across the group, public sustainability or compliance commitments the parent holds itself out as enforcing, parent-board approval of the subsidiary's key decisions, and the parent requiring compliance confirmations from the subsidiary.
None of these makes the parent a party to the subsidiary's contracts. They go to whether the parent has assumed its own duty of care to those affected by operations.
Why this does not help a contracting counterparty
If you are dealing with a subsidiary and you want the parent's covenant strength behind the deal, the Vedanta line does not give it to you. It is about tortious duties to people harmed by operations, not about who pays if the subsidiary breaches the contract.
The answer is an explicit parent guarantee. Do not assume the parent is on the hook just because it owns and controls the subsidiary - get the parent to sign up to the obligation you actually care about.
What it means for review
When the counterparty is a subsidiary, check the covenant: which entity actually holds the assets, and is the parent a party or a guarantor? Read group-definition wording, guarantee provisions, and any change-of-control terms together.
Treat a missing or weak parent guarantee as a commercial risk to raise, not a drafting detail to leave for later.
Use at the desk
Practical checklist
- Treat each group company as a separate legal person - a parent is not automatically liable for a subsidiary's contracts.
- If you want parent backing, take an explicit parent guarantee; do not rely on ownership or control.
- Read Vedanta and Okpabi as a direct duty of care in tort, not contractual liability or veil-piercing.
- Identify which entity holds the assets before you rely on a subsidiary's covenant.
- Check group definitions, guarantees, and change-of-control terms together when contracting with a subsidiary.
This guide is informational only and is not legal advice. It does not replace advice from licensed counsel on the facts of a specific transaction.
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