Legal Definitions - upstreaming

Definition: Upstreaming refers to a situation where a parent company uses the money or resources of its subsidiary for its own purposes, which may not be related to the subsidiary's business.

Example: Let's say that Company A owns 80% of the shares of Company B, which is a manufacturing company. Company B has been doing well and has accumulated a lot of cash reserves. However, instead of reinvesting the money in Company B's operations, Company A decides to use the cash to pay off its own debts or invest in a completely different business. This is an example of upstreaming.

Explanation: Upstreaming can be detrimental to the subsidiary company because it may not have access to the resources it needs to grow and expand its own business. In the example above, Company B may have had plans to invest in new equipment or hire more employees, but now it may not have the funds to do so because its cash reserves have been used by Company A. This can lead to a strained relationship between the parent and subsidiary companies, and may ultimately hurt both businesses in the long run.