Duty of Directors with Respect to Potential Violations of U.S. Law by Foreign Subsidiaries
This article considers whether the directors of a parent corporation breach their fiduciary duty to the shareholders and the corporation when they fail to obtain information concerning the business affairs and activities of a foreign subsidiary or to investigate fully the activities of a subsidiary, when those directors have information that the subsidiary may be violating United States law. These issues were originally raised in connection with alleged violations of the Rhodesian Sanctions Regulations and United States restrictions concerning sales to South Africa and Namibia by the wholly owned foreign subsidiaries of United States corporations. In response to allegations that their subsidiaries have carried on business in contravention of some of these requirements, several United States corporations have argued that foreign law provisions preclude control over their subsidiaries' operations and that certain business information regarding these entities is completely unavailable to parent corporations. Relying on assurances often given by the subsidiary's management, parent corporations have represented that their subsidiaries are in compliance with United States law.
Stephanie M. Phillips,
Duty of Directors with Respect to Potential Violations of U.S. Law by Foreign Subsidiaries,
13 Vanderbilt Law Review
Available at: https://scholarship.law.vanderbilt.edu/vjtl/vol13/iss1/1