Private Law Research

Referees 2023

Referees

Referees 2021

Referees

Referees

Current Issue

By Issue

By Author

By Subject

Author Index

Keyword Index

About Journal

Aims and Scope

Publication Ethics

Indexing and Abstracting

Related Links

FAQ

Peer Review Process

Journal Metrics

News

Limited Liability and Veil Piercing

Document Type : Research Paper

Authors

1 Associate Professor of Shahid Beheshti University Law School Tehran, IRAN

2 PHD Student on Private law at Shahid Beheshti University.

Abstract

Limited liability of shareholders of corporations is the primary principle of corporate law in most countries. Limited liability is however subject of debates by law and economic scholars. The research method applied in this research is theoretical analysis and the research approach is non-normative analyzing the possible solution without considering status que in search of most efficient solution.
Limited liability is not efficient in terms of economic analysis of law, particularly in the context of company group, which is the main actor of the today’s world. The externalities created by abuse of company form exceed its benefits. Common law doctrine of veil piercing sets aside the veil of corporation and holding shareholders personally liable for company debts in case of abuses by shareholders or lack of observance of company formalities. This doctrine can modify the effect of the externalities and reduce moral hazard created by limitation of liability. Such theory or similar mechanisms, except with special regulations related to the tax and banking system, do not exist in Iran legal system. Therefore legislation in this regard is recommended. 
 

Highlights

-

Keywords

References
 -       Easterbrook, Frank. H., Fischel, Daniel. R. “Limited Liability and the corporation” University of Chicago Law Review,Vol: 52 (1985) Pp 89-117.
-       Coleman, Jules, L. “Efficiency, Utility, and Wealth Maximization” Yale University Faculty Scholarship Series )1980) pp 1- 50.
-       Freedman, Judith.  “Limited Liability: Large Company Theory and Small Firms” Modern Law Review, Vol: 63 No: 3(2000) Pp 1- 36.
-       Manne, Henry. “Our Two Corporation Systems: Law and Economics”, Virginia Law Review,Vol: 53, No: 2, (1967) Pp 242-268.
-       Blumberg, Phillip, The multinational challenge to corporation law: the search for a new corporate personality (Oxford: Oxford University Press 1993).
-       Halpern, Paul, Trebilcock, Michael ., Turnbull, Stuart. “An Economic Analysis of Limited Liability in Corporation Law” The University of Toronto Law Journal,Vol: 30 No.: 2 (1980) Pp108-131.
-       Macey, J., & Mitts, J. “ Finding Order in the Morass: The Three Real Justifications for Piercing the Corporate Veil “ Cornell Law Review,  Vol.: 100 No.:1(2014) Pp 110-140 .
-       Blumberg, Philip I. The Law of Corporate Groups: Problems of Parent and Subsidiary Corporations Under Statutory Law of General Application (New York: Little Brown, 1989),
-       Cox, James. D, & Thomas.L Hazen Cox and Hazen's Treatise on the Law of Corporations, 3rd (New York: West Academic, 2011)  
-       Farrington, J. F. “Piercing The Connecticut Corporate Veil” Bridgeport Law Review, Vol: 109 No: 5(1983) Pp 80- 125.
-       Ottolengh, S. “From Peeping Behind the Corporate Veil, to Ignoring It Completely” The Modem Law Review, Vol.: 3 No.: 3 (1990) Pp 3342-3361.
-       Glynn, T. P. “Beyond 'Limiting' Shareholder Liability: Vicarious Tort Liability for Corporate Officers” Vanderbilt Law Review, Vol: 57 No: 2(2004)  Pp 300-335.
-       Thompson, R. B. “Piercing the Corporate Veil: An Empirical Study” Cornell Law Review, Vol.: 76. (1991)  Pp 1000-1012.
-       Shavell, Steven. “Liability for Harm versus Regulation of Safety” Journal of Legal Studies,Vol.: 13. (1984) Pp 340-370.
-       Millon, David. “Piercing the Corporate Veil, Financial Responsibility, and the Limits of Limited Liability” Washington & Lee Legal Studies Paper Vol.:08 (2006) Pp- 1- 150.
-       Cheng, Thomas. K. “An Economic Analysis of Limited Shareholder Liability in Contractual Claims”  Berkeley Business Law Journal, Vol:112 (2014) Pp 1-35.
-       Smith, Clifford. Warner, Jerold. B. “On Financial Contracting: An Analysis of Bond Covenants” Journal of Financial Economics, Vol.: 7 No.:2. (1979)  Pp 70-130.
-       Posner, Richard Allen. “The Rights of Creditors of Affiliated Corporations” University of Chicago Law Review, Vol.: 43. (1976) Pp 480-510.
-       Coase, Roland. “The Problem of Social Cost” Journal of Law & Economics, Vol: 3 No: 1, (1960) Pp 1- 30
-       [1] Meiners, Roger. E., Mofsky, J. S., Tollinson R.D. “Piercing the Veil of Limited Liability” Delaware Journal of Company Law, Vol: 4 (1979) Pp 480- 545.
-       Hansmann, Henry. & Kraakman, Rainier. “Toward Unlimited Share-holder Liability for Corporate Torts” Yale Law Journal, Vol.:100 No:7 (1991) Pp 1975-1998.
-       Flaningan, Richard. M. “The Economic Structure of the Firm” Osgoode Hall Law Journal, Vol:33 (1995) Pp 100-120.
-       Easterbook, Frank, & Daniel Fischel The Economic Structure of Corporate Law. (Massachusetts: Harvard University Press. 1999)
-       Lorie, James. H., Hamilton, Mary. The Stock Market: Theories and Evidence, (Pennsylvania: R. D. Irwin. 1973). 
-       Jensen, Michael. C., Meckling, William. H. “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure” Journal of Financial Economics, Vol.: 3 No.: 4 (1976) Pp 300-320.
-       Pistor, Katherina. Y., et al, “The Evolution of Corporate Law: A Cross-Country Comparison” University of Pennsylvania, Journal of International Economic Law, Vol.:23 No: 4. (2003) Pp 740-810.
 
قوانین و مقررات
-           United kingdom Companies Act 2006, https://www.legislation.gov.uk/ ukpga/ 2006/46/contents last visited on 12/12/18
 
پرونده‏ها
-           Amsted Industries, Inc. v. Pollak Industries, Inc;. 382 N.E.2d 393 (Illinois Appellate Court  First District (3rd Division), October 4, 1978).
-           McKinney v. Gannett Co., Inc. 660 F. Supp. 984 (D.N.M. 1981) (U.S. District Court for the District of New Mexico, August 25, 1981).
-           Morgan Bros., Inc. v. Haskell Corp. 6575-1 (December 10, 1979).
-           Kinney Shoe Corporation v. Polan, United States Court of Appeals 4th circuit, No. 939 F2nd 209, (1991).
-           Sea-Land Services, Inc. v. Pepper Source, United States Court of Appeals, Seventh Circuit, No. 902589. (1993)
-           Tanzi v. Fiberglass Swimming Pools, Inc. 414 A.2d 484 (1980) (Supreme Court of Rhode Island., May 9, 1980).
Private Law Research
Volume 7, Issue 27
September 2019
Pages 63-90
Files
Share
How to cite
Statistics