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Among the subsidiaries of the now defunct Thomas Cook Group, some ceased operation together with their parent (e.g. Airtours), while others continue to operate (e.g. Balearics).

How exactly is the fate of subsidiaries decided? Why aren't they all liquidated to pay the debts of the parent company?

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Why aren't they all liquidated to pay the debts of the parent company?

They are not automatically liquidated because they might be worth more as a running company than as a liquidated one*1. In fact, as long the owner has no restrictions on when to liquidate it, a running company is worth at least as much as its liquidated version (because the moment the running company is worth less than the assets of the liquidated company, the owner can begin the liquidation).

Those companies are assets of the parent company, and (if nothing stops the bankruptcy process) in due time they will be sold to pay to creditors.

Typically its management will be closely monitorized by the people overseeing the bankruptcy process, and theoretically it could be decided to liquidate them if that is the way of getting the maximum value out of it. But in practice, if there are lots of debtors it is likely that some of them would not agree with that measure, and the risk of lawsuits by those debtors could stall that measure.

1 In fact, the usual reason to start any business is that you expect to get out of it more than you put into it.

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  • So creditors of Balearics will be paid in full (assuming it will be sold as a whole), while creditors of Airtours and Thomas Cook itself will only gets what's left after the bankruptcy procedure?
    – Dmitry Grigoryev
    Commented Sep 26, 2019 at 8:32
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    In general (barring fraudulent schemas), yes. Balearics is a different entity with its owns debts, incomes and assets. Creditors of Balearics are not directly affected at all by the bankruptcy and are not part of it, An important caveat is that if Balearics business depended on Thomas Cook (for example if it was its only or main client) the demise of TC can lead to difficulties and even bankruptcy of Balearics, but that is independent of the fact that TC owns Balearics and would affect any other business that depended on TC contracts.
    – SJuan76
    Commented Sep 26, 2019 at 8:36
  • To add: The reason subsidiaries often close is because they are not really full companies but either very intermingled or depending on the parent company. If you are Siemens and own a separate IT company, the company can survive. If you are Thomas Cook Group and the seaprate company sells Thomas Cook travels in Ireland, then it may have lost all the business, and have liabilities to the parent company making it simply not viable as independent business, or even cascade the banktrupcy (becasue the parent is bankrupt and the subsidiary is owed money or services pushing it into liquidation.
    – TomTom
    Commented Sep 26, 2019 at 9:33
  • Also note that if the company is profitable it can continue to operate indefinitely. And obviously stopping a profitable company from operating will make the parent far less attractive to potential investors.
    – xyious
    Commented Sep 26, 2019 at 19:38

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