By Karen Vandekerckhove
When courts ‘pierce the company veil’, they forget the separateness of the company and carry a shareholder liable for the corporation’s motion as though it have been the shareholder’s personal. even supposing as a basic rule the courts are reluctant to permit company veil piercing, collectors of an bancrupt company often try and carry the shareholders in charge while they can't receive delight from their debtor. within the usa, in truth, piercing claims represent the only so much litigated quarter in company legislations. This learn clears up many of the mists placing round the suggestion of company veil piercing. What precisely is company veil piercing and within which occasions does it take place? What are the criminal ideas concerned? Following a quick review of the appropriate legislation within the six felony platforms which are the topic of this study-those of Belgium, the Netherlands, France, Germany, the United nation, and the United States-the writer proceeds with a extra profound research from a sensible comparative viewpoint, ranging from specific events that sometimes demand shareholder legal responsibility for the bills of subsidiary businesses. one of the grounds for veil piercing claims the writer discusses the subsequent, besides the considerable and procedural legislations and very important circumstances linked to each one within the six jurisdictions lined:
- asset stripping;
- undue carrying on with of loss-making actions;
- and identity or the respect of the company crew as an monetary unit.
during the presentation, a radical research of felony scholarship in the realm results in a variety of functions of some of the theories and doctrines that may be dropped at endure on veil piercing circumstances. moreover, an in-depth dialogue of the overseas size of company veil piercing focuses at the query of which legislation should still govern the legal responsibility of a mother or father company for the accounts of its subsidiary. all through, the author’s transparent perception into the sizeable legislations of veil piercing sheds mild on conventional misconceptions within the clash of legislation at the factor. She additionally info projects undertaken by means of quite a few foreign our bodies, together with the United countries, the association for financial Cooperation and improvement, the eu Union, the overseas court docket of Justice, and the overseas Labour association. Dr Vandekerckhove’s learn is the main entire, far-reaching, and updated learn of this significant turning out to be sector of company legislation perform. As such it's going to turn out of significant price to practitioners, judges, and lecturers within the box, and may end up its worthy anyplace on the earth the place the presence of establishment businesses is felt.
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Extra resources for Piercing the Corporate Veil (European Company Law)
L. Rev. 1 967), 262. 26. H. R. Fi schel , above ( U. Chi. L. Rev. 1 985), 96-97 . 27 . H. R. Fischel , above ( U. Chi. L. Rev. G. Manne, above ( Va. L. Rev. A. Posner, above ( U. Chi. L. Rev. 1 976), 506-507, 5 1 1 -5 1 2 and 5 1 5-5 1 6. 28. H. R. Fi schel , above ( U. Chi. L. Rev. 1 985), 92. 29. C. Clark, above (Harv. L. Rev. 1 979), 825 . 30. A. Posner, above ( U. Chi. L. Rev. 1 976), 506 and 5 1 5 . 3 1 . H. R. Fischel, above (The Economic Structure of Corporate Law), 47 . Chapter 1 8 against the risk, business managers will be encouraged to venture into activities that they would otherwise not undertake.
Finally, we also leave aside situations of reverse piercing. Although reverse piercing is often treated in the same way as ordinary piercing, we think that it may involve different policy considerations. For instance, in reverse piercing cases the question arises to what extent the control that a shareholder has over its corporation should receive the same weight as in ordinary piercing cases. Also, in ordinary piercing situations the interests of the company ' s creditors usually outweigh the interests of the shareholder' s creditors, who see the assets of their debtor diminish as a result of the piercing.
It may refer to a maj ority of voting rights, the ability to determine the composition of management, the ownership of the majority of issued shares and/or it may follow from contractual arrangements. Besides such legal control, de facto control depends on the degree of practical influence exercised on a corporation' s policies and operations despite of legal rights. 2 1 Such a de facto control is more difficult to measure. It may result, for instance, from the circumstance that a shareholder with a small participation nevertheless has been able to exercise the maj ority of voting rights because other shareholders did not show up at the shareholders ' meetin ¥: , from exclusive purchase agreements or other types of strong economic relations.