7.3 Legal Risks 313monies that it has invested in A’s shares, and B may not be able to recover the
sums that A owes to B any more than other creditors can.^11 B would need fresh
capital because of the losses. However, B cannot ask A to inject new capital in B.
This can lead to a domino effect with the bankruptcy of the parent followed by a
chain of bankruptcies of subsidiaries.^12 Furthermore, in the bankruptcy of A, its
assets would be managed by external administrators. What would happen with B’s
shares depends on the case. If the administrators have a duty to maximise the sums
that can be distributed to A’s creditors, they might: restructure A and let A keep
the shares; sell the shares to the highest bidder; or decide to liquidate B.
For example, Chapter 11 enabled Delphi, a spin-off of General Motors, to reorganise its
business in 2005. The transformation plan permitted Delphi and its US subsidiaries to re-
duce their pension liabilities and high labour costs, and the non-US subsidiaries of Delphi
were largely unaffected by the process. In contrast, the bankruptcy of Oxford Automotive,
another US-based supplier, resulted in the bankruptcy of its German subsidiary. In 2009,
the subsidiaries of GM faced similar problems.
(^11) See, for example, Peitsmeier H, Opel will nicht mit GM untergehen, FAZ, 17 November
2008 p 15: “Klar ist, dass General Motors seiner deutschen Gesellschaft mehrere Milli-
arden für Entwicklungsleistungen schuldet ...”
(^12) See, for example, Preuß S, Roth M. Dominoeffekt für Merckle? FAZ, 7 December 2008
p 18.