How is a bank protected from unlimited liability?
A CDCs corporate separateness protects the bank(s) from debts and liabilities of a CDC. A CDCs operations should be reviewed to ensure that it maintains a separate corporate identity. If a CDC subsidiary fails to maintain its separateness, the parent could become liable for the debts and obligations of the subsidiary, subject to litigation, or both. How a bank goes about keeping corporate identities separate is to some extent determined by state law and the general nature of subsidiary operations. Certain organizational elements and operating procedures are generally recognized as preserving corporate separateness in the absence of other factors, such as fraudulent purpose on the part of the parent. Factors that determine separateness include corporate procedures, financing, business purpose, and disclosure of information. Specific steps to establish and maintain separateness include: • Maintaining a separate office through which the subsidiarys business is conducted. • Having at least
