financial support undertaking

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daljeet
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financial support undertaking

Post by daljeet »

Can a subsidiary gives undertaking to provide financial support to parent so that the parent can meet its obligation as and when they fall due?
JRSB
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Re: financial support undertaking

Post by JRSB »

Doesn't really make sense to me... the parent controls the sub anyway so you don't really need any undertakings.
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Marek Muc
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Re: financial support undertaking

Post by Marek Muc »

what do you mean by 'giving undertaking'?
JRSB
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Re: financial support undertaking

Post by JRSB »

Presumably it's about a letter of support in an audit scenario?
daljeet
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Re: financial support undertaking

Post by daljeet »

Yes letter of financial support. The subsidiary is operating entity and in good financial position.
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Marek Muc
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Re: financial support undertaking

Post by Marek Muc »

Then why not. But I agree with JRSB that it makes little sense, unless we're talking about some really exceptional circumstances.
JRSB
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Re: financial support undertaking

Post by JRSB »

Perhaps there's an extremely influential NCI who has other plans for surplus cash (wants to reinvest rather than dividend or loans to parent) but then there could be a bigger question of control. If it is indeed a subsidiary then it's controlled and probably appoint the people they want to the Board, ie pieces of paper not required
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Marek Muc
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Re: financial support undertaking

Post by Marek Muc »

Agreed. But then if the auditors find this paper to be a useful CYA for them, why not give it to them :)
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