Seriously, no, corporate law doesn’t work that way

While the split in SoftBank’s contribution between equity and debt is still being negotiated, its investment could make it the majority owner of WeWork. Were this to translate to formal voting control for SoftBank, it could force it to consolidate the loss-making company on its balance sheet, the sources said.

This in turn could result in SoftBank assuming WeWork’s liabilities, which include long-term leases for office space that it refurbishes and rents out under short-term contracts, according to the sources.

No, just because you’ve got to consolidate the subsidiary doesn’t mean you’re now responsible for the subsidiaries debts.

You still have limited liability at that level of the subsidiary.

You might have to show them on your balance sheet, sure, that’s what consolidation means. But still not responsible for them.

2 comments on “Seriously, no, corporate law doesn’t work that way

  1. I thought the ‘Softbank’ investment in WeWork was mainly via its Vision Fund, so the Softbank balance sheet is irrelevant. Although I suspect the early, cheap, investment in WeWork was from Softbank and the later chunks from the fund. While I suspect Son’s rep is based on a couple of good bets, he’s not an idiot.

    IIRC Softbank has a more significant interest in WeWork APAC and so might try to take control there (where the lease lengths will be shorter).

  2. It kinda depends on charges, no recourse clauses, letters of support etc. Who would rent to a subsid without some kind of guarantee?

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