In business, it is a common strategy for a company to set up a
subsidiary. The reasons for this vary, but frequently include risk
mitigation, tax optimization, navigating regulatory frameworks and
isolating specific business operations.
One of the main legal principles supporting this approach is the
concept of separate legal personality, which is a fundamental
element of corporate law in many jurisdictions, including in
Canada. According to Canadian corporate law, this principle
establishes that a corporation is an independent entity, distinct
from its shareholders, directors, and officers. As a result, each
subsidiary operates autonomously, maintaining its own assets,
liabilities, and management, while in theory, if not in practice,
still benefiting from the support and strategic direction of its
parent company.
