Corporate Veil Research Articles

Enterprise Corporatism: New Industrial Policy and the "Essence" of the Legal Person

The legal person has become an inert person indeed. While in the 19th century it was a fiery fighter for political and economic freedoms against government regulation, today it is no longer trusted with any role in major economic policy controversies. What can the legal person, of all persons, possibly contribute to current issues such as the industrial divide, the European choice between Americanization and Japanization of industrial organization, the strategies of new flexibility, and the management of uncertainty?' The search for the of the legal person, which has fascinated whole generations of lawyers, has now been tacitly abandoned due to an everyday familiarity with this legal entity. Today the legal person is having to pay the price of success: nobody is interested in its essence any longer, and, despite warnings to the contrary, it is no longer taken seriously, not even when the issue involved is the famous piercing of the corporate veil that so inflames the legal imagination.2 To be sure, there have been some recent attempts to rediscover the political dimensions of the legal person.3 In an impressive rein-

Testing the direct substitutability hypotheses of saving

This paper contains some tests for the direct substitutability hypotheses of household saving with respect to corporate and /or government savng by using an international data set from 12 OECD countries. On the whole findings suggest that the hypothesis according to which households pierce (party) through the ‘corporate veil’ cannot be rejected, while the hypothesis that households subsume government behaviour under their own behaviour does not get clear support.

Legal Approaches to Injury Prevention

Injury prevention can be achieved, but it will require a fundamental reexamination of our approach to injury causation. We must learn to examine the manufacturing and marketing practices of companies that produce the products associated with children's injuries, for these are the real culprits in our national childhood injury plague. Most importantly, we must learn to demand from industry that it take injury prevention seriously. If it refuses to do so it must face the consequences before the American system of justice. Legal advocacy can be a valuable tool in this effort. The legal system provides the means to pierce the corporate veil of secrecy and to learn how and why products are made of hazardous design. Under the light of public scrutiny, culprit companies can be made to pay the price for producing hazardous products. Only in this manner will industry be given the incentive to increase product safety.

Limited Liability and the Corporation

Limited liability is a fundamental principle of corporate law. Yet liability has never been absolutely limited. Courts occasionally allow creditors to pierce the corporate which means that shareholders must satisfy creditors' claims. Piercing seems to happen freakishly. Like lightning, it is rare, severe, and unprincipled. There is a consensus that the whole area of limited liability, and conversely of piercing the corporate veil, is among the most confusing in corporate law.' We argue to the contrary that economic analysis-in particular the theory of the firm and the economics of insuranceexplains the legal treatment of limited liability. Both the rules and the exceptions serve valuable functions.

Money, Growth and Disequilibrium

The analysis of the trilogy of the title receives an increasing attention in the literature. Malinvaud (1980) analyses the dynamics of a disequilibrium model with a fixed-coefficients technology and an investment function that is common to all disequilibrium regimes. His main conclusion is that only Keynesian equilibria are stable in the long run. Laussel (1980) generalizes this model by relaxing these two assumptions. Several cases appear in his model, but Malinvaud's conclusion is in general vindicated. The present paper shows how a strong wealth effect can stabilize the other types of steady states. However, a complete analysis of the investment function involves a multiplication of the number of disequilibrium regimes. This follows from the role of expectations in investment behaviour. Firms must take into account the various cases of disequilibrium they will have to face before reaching their target capital stock. This reduces the attractiveness of the disequilibrium model as a tool for macroeconomic analysis, because of its exaggerated complexity. Following the tradition of neoclassical growth theory, we sidestep this issue and consider a two-asset-money and capital-world, as Tobin (1961, 1969) advocated. B6hm (1978) has analysed the dynamics of money in a disequilibrium framework, but his model ignores capital accumulation. By contrast, our present model puts the emphasis on portfolio equilibrium, somewhat in the IS-LM tradition (Tobin, 1969). We assume an economy without corporate veil, where profits are wholly received as dividends by households. In Bohm's model these profits are taxed away by the government, while Barro and Grossman (1976), Malinvaud (1977) and Laussel (1980) assume a fixed interest rate. In our model, firms take the real wage rate as given, and determine the rate of interest by paying dividends to their owners. On the asset side, we assume a standard demand-for-money function. As there are only two assets, the demand for capital is defined implicitly by the adding-up conditions (Tobin, 1969), and the investment function could be derived from it, given an initial capital stock. The model is specified in Section I, and its temporary equilibria analysed in Section II. Accumulation of capital is the subject of Section III.

A Digest of Recent Israeli Cases

This was an Additional Hearing granted by leave of the President of the Supreme Court for the purpose of considering the incidence, ratione personae , of the good faith requirement established under sec. 12 of the Contracts (General Part) Law, 1973. The significance of the decision lay in the question of the liability of agents and company directors who negotiate contracts to which they are not themselves party. In particular, the Court was called upon to consider whether, on the basis of sec. 12, a company director negotiating a contract solely on the company's behalf could be held personally liable in relation to that contract, or whether he could seek refuge behind the corporate veil. The respondent, David Castro (hereafter: the Purchaser), had negotiated with Yosef Pnini (hereafter: the Appellant) for the purchase of an apartment to be built by Pnidar, Development and Building Investments Company, Ltd. (hereafter: the Company). The Appellant was manager of the Company, and he and his wife were the sole stockholders. The Appellant and the Purchaser signed a standard-form preliminary agreement which the Company used for the sale of apartments in buildings that it constructed, and the Purchaser made all payments due for the purchase of the apartment. During the course of negotiations it was not revealed to the Purchaser that neither the Company nor the Appellant owned the property upon which the apartment was to be constructed.

Partnership Law and its Impact on “Domestic Companies”

Whatever may be the correct analysis of a company director's status, it is generally accepted that his duties, whether fiduciary or common law, are owed to the company. The reasons why this is considered appropriate, and indeed commercially desirable, are manifold. From the conceptual point of view probably the most important is to do with the doctrine of corporate personality. Directors, as directors, owe their duties to their corporate principal and no one else. Of course logically the fact that one owes a duty to another does not prevent that duty being owed to a third party. The simple rule, that directors as directors owe their duties to the company, is reflected in a number of other rules, such as the so called rule in Foss v. Harbottle. In recent years the courts have been prepared to lift the corporate veil and disregard the fictional independent entity where justice so requires.

Fiscal Jurisdiction and Accrual Basis Taxation: Lifting the Corporate Veil to Tax Foreign Company Profits

Fiscal Jurisdiction and Accrual Basis Taxation: Lifting the Corporate Veil to Tax Foreign Company Profits

Reweaving the Corporate Veil: Management Structure and the Control of Corporate Information

There is a striking similarity of imagery in much recent writing about the derelictions of large corporations. Corporations, it is asserted, often behave badly as a result of their internal organization and structure; the remedy for this disturbing proclivity is said to involve going behind the corporate veil, forcibly intruding on the corporation's private spheres, to reshape the process through which it makes decisions. Equally striking about this genre of corporate literature is its failure to describe actual experience behind the veil and to examine specific instances of the kinds of corporate decisions to be reached by its proposed reforms. Similarly, much of this writing tends to downgrade more traditional remedies for corporate wrongdoing-the shareholder's derivative suit, civil and criminal fines and penalties-in favor of changes in management structure. The restructured corporation envisaged by these critics would feature an independent and knowledgeable board of directors vigilantly monitoring the performance of operating management, assessing that performance in terms of goals set by the board while detecting any crucial missteps in management's operation of the business. After describing these proposals for restructuring, this article examines some recent instances of corporate behavior which, in the author's view, bear heavily on the proposals' likelihood of success.

The Rights of Creditors of Affiliated Corporations

(1) The parent company has advanced funds to its subsidiary in the form of a loan; if the subsidiary does not have enough assets to satisfy all of its creditors, should the parent be treated differently from other creditors? (2) If a subsidiary is unable to satisfy a creditor's claim out of its own assets, should the creditor be entitled to satisfy his claim out of the assets of the corporate parent (i.e., to pierce the corporate veil)? (3) If two affiliated corporations become bankrupt, should the assets of, and the claims against, the two corporations be pooled?

Deeming Fiction: The Statutory Intendment of Affixing Corporate Criminal Liability in India

This article discusses the statutory intendment pursued by the Indian judiciary in order to avoid the standstill issue of corporate criminal liability, by proper mechanism of fastening legal responsibility through the creation of a legal fiction. Far from giving corporations a shield to commit fraud, this concept narrows down the scope of escape by rejecting the plea that no one is to be held criminally liable for an act of another. This article studies the issue of how the judiciary has disallowed the notion that a body corporate cannot commit a criminal offence by reasoning out the scope of deeming fiction. This article also discusses the issue of one principle being compromised for another, arraigning the corporation along with the functionaries of the corporation. The authors argue that the principle of deeming fiction can capture the desirable features of other principles such as identification, attribution and lifting of the corporate veil. Further the authors demonstrate as to how this principle renders all other theories meaningless in the light of a plain statutory intendment, when put to use in its complete sense to have full effect. The application and use of various UK, USA, Canada, and Indian case laws has been adopted in order to understand and compare the above mentioned machinery of fastening culpability to the money making corporations, for the offences committed by them. Lastly, the authors feel that the courts, upon proper application of mind, have considered the issues of participation, responsibility and enforceability in each case, without which it would have been a futile exercise. The article concludes on the note that a blanket application of either principle would prove to be detrimental and statutory intendment would fasten the liability of deemed culpability, and proceeds against the corporation or the director or both, accordingly.

A Note on the Cost of Capital, Leverage, Dividends, and the Corporate Veil

A Note on the Cost of Capital, Leverage, Dividends, and the Corporate Veil