Which of the following would be a valid reason for the parent company to convert a branch into a locally organized subsidiary?
A) to insulate the parent company from local liability
B) to remove the separate legal entity status of the branch
C) to bring it under even stricter supervision of the parent company
D) to decrease local participation in the branch

Question

Quizplus · Accepted Answer

Converting a branch into a locally organized subsidiary can help insulate the parent company from local liabilities because the subsidiary is a separate legal entity. This separation limits the parent company's exposure to risks and liabilities incurred by the subsidiary. Choices B, C, and D are not valid reasons for such a conversion; in fact, creating a subsidiary typically reinforces its separate legal entity status, may not necessarily lead to stricter supervision by the parent company, and could increase rather than decrease local participation.

Which of the Following Would Be a Valid Reason for the Parent