Corporate Veil Research Articles

Eligible Juridical Person Investors in ICSID Arbitration

An investors eligibility is a prerequisite for International Centre for Settlement of Investment Disputes (ICSID) tribunal to acquire jurisdiction over a case. There is no definite conclusion on whether an entity is an eligible investor, often leading to disagreement. In current international investment practice, arbitration tribunals usually consider the definition of investor in the bilateral investment treaties concluded by the parties to the dispute and use it as one of the bases for determining the investors international status. Since the identification of juridical person investors is a controversial issue in practice, this essay will analyze the criteria for ICSIDs decision in the Tokios Tokels v. Ukraine as an example and examine the issue of pierce the corporate veil to explore the path to resolve related disputes.

English Judicial Approach towards Piercing the Corporate Veil after Prest v Petrodel

The application of the evasion principle by Lord Sumption in Petrodel v Prest is critically inspected and investigated to highlight how the doctrine of piercing the corporate veil has been applied by the English Courts. To this end, it is pinpointed that the scope of the doctrine has been narrowed, and the courts frequently misinterpreted the evasion principle, as evinced by the recent case Akhemodova v Akhemdov and Wood v Baker

DLF Ltd. vs. Securities and Exchange Board of India

The Security Exchange Board of India (hereinafter referred to as SEBI) and Delhi and Finance Limited (hereinafter referred to as DLF) recently engaged in a legal dispute over the details DLF disclosed in its "red herring prospectus." The disclosure relating to three of DLF's subsidiaries, over which SEBI claimed DLF held constructive control, was challenged by SEBI. Additionally, SEBI claimed that DLF concealed an FIR that had been filed against it, substantially impairing the present and future interests of its prospective shareholders. This was deemed by SEBI to be a flagrant breach of both the disclosure and investor protection (DIP) guidelines[1] and the rules for the issuance of capital and disclosure obligations. SEBI prohibited DLF and six of its senior management officers from accessing the capital market for three years as a result of the same. This ruling was contested before the Securities Appellate Tribunal, which then investigated the facts and provided more insight into the case that will be examined in more detail. This case sheds significant light on the corporate veil concept, the disclosure obligations when offering shares to seek funds from the capital market, and the conditions and parties involved in a lawsuit to dispute such disclosure of information. Given that DLF is a top building and construction company, there is a focus on establishing the proper standards of transparency. This case establishes a significant precedent for a highly strong corporate and industrial culture.

The Responsibility Of Holding Company Towards Bankruptted Subsidiaries Based On Law No. 40 Of 2007 About Limited Companies

The purpose of this research is to identify and analyze the juridical liability of the holding company to its bankrupt subsidiary and the holding company's responsibility to its bankrupt subsidiary. The research method used in this research is normative qualitative. The holding company's juridical responsibility for a bankrupt subsidiary, in certain circumstances the holding company can be held accountable for its subsidiary based on the Piercing The Corporate Veil principle. The application of this principle to holding companies can occur either through legal agreements or based on certain agreements. Implementation of holding company responsibilities for bankrupt subsidiaries in the case of PT. Ometraco Corporation, Tbk. dar. PT. Ometraco Multi Artha pointed out that the Supreme Court is of the opinion that PT. Ometraco Corporation, Tbk. as the holding company is also responsible for the debt of PT. Ometraco Multi Artha as a bankrupt subsidiary based on an agreement.

Bankruptcy in groups

AbstractWe examine bankruptcy within business groups. Groups have incentives to support financially distressed subsidiaries, as the bankruptcy of a subsidiary may impose severe costs on the group as a whole. This is in part because, in several countries, bankruptcy courts often “pierce the corporate veil” and hold groups liable for their distressed subsidiaries’ obligations as if they were their own. Using a large cross-country sample of group-affiliated firms, we show that, by reallocating resources within the corporate structure, business groups actively manage intra-group credit risk to prevent costly within-group insolvencies. Moreover, we document that recent regulatory changes in the approval and disclosure of related party transactions are costly for business groups in that they constrain their ability to shield their subsidiaries from credit-risk shocks. Our study informs the current regulatory debate on related party transactions by highlighting an important cost of anti-self-dealing regulation.

Managing risk in corporate groups: Limited liability, asset partitioning, and risk compartmentalization

AbstractResearch SummaryLimited liability enables corporate parents to avoid financial responsibility of their subsidiaries. However, courts can disregard separate legal personality, “pierce the corporate veil,” and impose the debts of a subsidiary on its parent—an exception referred to as “enterprise liability.” We argue that in countries with weak enterprise liability, groups can better compartmentalize risks by incorporating more of their units as legally independent subsidiaries. Weaker enterprise liability may also induce headquarters to delegate more decision‐making authority to their subsidiaries, invest more, and expand faster, although failure rates could rise. Using data from 16 countries across the Americas, Asia, and Europe, we provide evidence supporting these predictions. This paper highlights two channels—risk compartmentalization and subsidiary autonomy—through which limited liability laws affect organizational outcomes.Managerial SummaryLimited liability is a key attribute of the corporate form. However, when the owner of a corporation is another corporation (as in corporate groups), a key justification for limited liability—to protect small, passive investors from unlimited losses—is severely weakened. We examine how variation in parent limited liability protections for subsidiaries across countries affect firm boundaries, internal organization, and performance. In countries with strong limited liability protections, groups partition their assets more finely into legally independent subsidiaries and grant their subsidiaries more autonomy. They also invest more and grow faster, although they experience higher rates of significant revenue declines. Our findings suggest that limited liability laws play a central role in shaping organizational structure and performance.

Status Badan Hukum Perseroan Perorangan Ditinjau dari Hukum Perusahaan Indonesia

Limited Liability Company (LLC) is a legal entity that was born based on an agreement, this has been in effect since the KUHD era to Law Number 40 of 2007 concerning LLC. This concept then underwent a change after the enactment of Law Number 11 of 2020 concerning Cipta Kerja which introduced a new model of LLC, namely an Single Member Limited Liability Company (SMLLC) which is intended for businesses that meet the criteria as Micro and Small Enterprises (UMK). This is contradictory to the principle of a legal entity which requires the legal entity to be a place where people gather to achieve collective goals; and contrary to the prevailing doctrines in legal entities so far. Based on this, this study aims to discuss the legal status of SMLLC and the consequences for the separate entity doctrine by using a normative-juridical research typology. The legal status of an individual company has fulfilled the formal requirements as a legal entity, namely the existence of approval by the state. However, materially SMLLC does not automatically fulfill the four other legal entity requirements, namely the existence of assets entity separation, a specific purpose, self-interest, and organ structure, so that an SMLLC doesn’t meet the requirements as a legal entity. Then, the personality of the founder also cannot be separated from the personality of the legal entity. This is linear with the increasingly dominant role of the piercing the corporate veil doctrine, and reducing the role of the separate entity doctrine itself

Доктрина «снятия корпоративной вуали»: сущностные особенности и практика применения в правовой си- стеме Российской Федерации

The article reviews the corporate veil lifting doctrine, its essential features, gives a critical evaluation of some theoretical provisions, brings forward ideas concerning the grounds for and the conditions of its implementation in the Russian legal system and further development of this legal institution.

Realitas Prinsip Piercing The Corporate Veil dalam Mewujudkan Good Corporate Governance

. The purpose of this article is to establish the development of the legal theory and doctrine of Piercing The Corporate Veil in the law on limited liability companies. The legal reform of legal persons can be traced back to two milestones in the history of legal persons, namely, firstly, the emergence of the theory of legal persons, which focuses on the personalization of legal persons as if they were persons, and secondly, the emergence of the corporate law doctrine known as Piercing the Corporate Veil, which is motivated to reveal the legal veil of the persons behind the company, namely, shareholders, directors and managers. The research method is normative law with a normative approach), concepts and cases. The results of this study can be attributed to the fact that the principle of piercing the corporate veil supports the implementation of the GCG to prevent the abuse of shareholder power. The principle of piercing the corporate veil can limit or prevent unlawful acts committed by shareholders, commissioners and directors who exploit corporate opportunities for personal gain or misuse of corporate assets. The conclusion of this study is that the legal effect of the principle of piercing the corporate shield on the liability of the PT, if violated, has the effect of limiting the liability of the company to unlimited liability (unlimited liability) up to the personal assets of the shareholders.

A game of cat and mouse: Human rights protection and the problem of corporate law and power

AbstractHuman rights violations by corporations are widespread and have a broad spectrum: damage to people’s health through pollution, environmental accidents and health and safety failures, forced labour or child labour, underpaid workers, displaced communities, contaminated water sources, use of excessive force, and discrimination, for example by race, gender or sexuality. Corporate violence, resulting from a long history of corporate power and colonialism continues today as corporations have grown into powerful global conglomerates. Through complex and opaque multinational groups and supply chains, use of corporate law concepts such as the corporate veil, as well as other actions such as tax avoidance and lobbying of national and international political institutions, corporate actors remain free to pursue their goals. Despite efforts to combat corporate harm through the development of a business and human rights movement success has been limited and significant gaps remain in the global governance required to ensure protection. This article argues that, similar to a cat and mouse game, corporations find new ways to defend themselves against those seeking to dismantle their power or to prevent human rights infringements. The problem is rooted in structural and systemic inequalities within the international legal framework and in company laws that maintain corporate structures that obstruct the human rights movement’s progress. The current drive towards a more sustainable business agenda requires a just transition, including transformation of global and corporate structures to tackle human rights violations and the inequalities of power and wealth that facilitate such violations.

Kedudukan dan Tanggung Jawab Induk Perusahaan Terhadap Pailitnya Anak Perusahaan

This research was conducted to explain the position of the holding company as a shareholder and creditor of a bankrupt subsidiary company in terms of Company Law and Bankruptcy and Postponement of Debt Settlement Obligation Law, furthermore, to explain the holding company’s responsibilities for the bankruptcy of the subsidiaries company which are bound by an obligation agreement to only sell the product of the subsidiary company to the holding company in terms of Company Law. This research method is carried out with normative juridical and descriptive-analytical research specifications that describe the practice of Limited Liability and/or Bankruptcy which will be analyzed based on relevant rules such as regulation, theory, and legal principles that are in accordance with the object of the problem, along with that this research was conducted by field research by interview a curator. Then, research specifications with analytical descriptive that describe data on the Company’s practices and/or bankruptcy which are then analyzed based on relevant rules that are in accordance with the object of the problem. The data analysis method is carried out in a qualitative juridical way that describes das sein on the company and/or bankruptcy and analyzes the data based on legal aspects or das sollen without using a diagram. The result of this research shows that when the bankruptcy happened in the subsidiary company, the position of the holding company as creditor and shareholder is different, therefore that position cannot be equaled at the time of payment, the shareholder must wait for the bill paid for the entire creditors are done. If there is still a remaining company asset, the shareholders are entitled to receive their shares. If the holding company through a loan agreement with a subsidiary company contains a clause that exploits the subsidiary company for the benefit of the holding company with bad faith, then the agreement must be null and void because it does not meet the legal requirements of the agreement objectively. As the consequence of the agreement, caused the subsidiary company to fall bankrupt, there has been an indication of piercing the corporate veil so that the position of the holding company as the shareholder and creditor of the subsidiary company, is not entitled to obtain the return of the debt and shares, however, the holding company must be responsible for the losses it incurred

The Piercing of the Corporate Veil and Creditor Protection

The Piercing of the Corporate Veil and Creditor Protection

REGULATION OF BENEFICIAL OWNERSHIP IN SOUTH AFRICA AND ZIMBABWE

Criminals despise transparency. Beneficial ownership transparency measures are aimed at ensuring that the structure of corporate vehicles is evident and that their real owners do not hide behind the corporate veil. South Africa and Zimbabwe have been struggling to prevent and combat money laundering, corruption and tax crimes. Competent authorities in both countries are starting to appreciate the importance of beneficial ownership transparency measures in the fight against economic crime. This paper examines whether South Africa and Zimbabwe have made progress in establishing effective legal frameworks on the beneficial ownership of legal persons and legal arrangements. It discusses the Financial Intelligence Centre Amendment Act 1 of 2017 which establishes beneficial ownership transparency measures for South Africa. It goes on to discuss the Zimbabwean situation regarding beneficial ownership and its regulation. Lastly, it makes certain recommendations concerning the beneficial ownership regimes of both countries.

Empirical Study of the Reverse Piercing of the Corporate Veil

Empirical Study of the Reverse Piercing of the Corporate Veil

Asset market closure and the neo-Pasinetti theorem

This note comments on a corollary of the neo-Pasinetti Theorem – the dependence of national saving on corporate saving – as elaborated by Peter Skott in his model of corporate capitalism. The central insight is that, under an alternative closure that treats the wealth effect conveyed by the q-ratio as a mechanism for coordinating corporate investment and national saving, this corollary will not go through. An increase in corporate retentions will not affect the q-ratio or national saving; it will reduce the dividend yield and increase the rate of capital gains. This creates the impression that equity-owning households have ‘pierced the corporate veil’ when in fact this outcome follows from the logic of the corporate capitalist system under the alternative closure. The note thus qualifies the neo-Pasinetti result by showing that it depends on the choice of closure.

Probijanje pravne ličnosti iz ugla sudske prakse

Piercing the corporate veil represents one of the most contraversal institutes in company law because it represents a deviation from the rules on limited liability. As this institute became part of the judicial practice, the judicial practice is very important in the analysis of the given institute. There are some comparative legal systems in which this institute is often applied in judicial practice. On the other hand, there are systems, including domestic ones, in which this institute is rarely and cautiously applied in practice. The main goal of the research in this paper is the analysis of the institute of piercing the corporate veil and its significance in Company law, with a special reference to domestic judicial practice and the analysis of certain characteristics of comparative judicial practice.

The Grounds under Which the Court May Pierce the Corporate Veil

The Grounds under Which the Court May Pierce the Corporate Veil

A társasági jog történeti áttekintése, a vezető tisztségviselő felelősségének a szabályozása a szocialista államberendezkedéstől a gazdasági társaságokról szóló 1988. évi VI. törvényig

In the study, I attempt a brief historical overview of our corporate law, presenting the rules of executive officer liability from the socialist state structure to Company Law Act 1988/VI. In addition to the presentation of socialist economic management systems, the study includes a brief overview of the socialist legal order, the codification of the old Civil Code, and a review of the legal institution of economic fines that are specific to the socialist legal system alone, serving the specific needs of the time. It also involved forcing the expected behavior. The period of regime change and its corporate law dimension were mostly marked by spontaneous and active privatization. During this period, the view of a universal collectivity based on the existence of state corporations ceased, spontaneous privatization was based on a conscious corporate decision, where the company’s managers themselves chose their privatization partners, the method and conditions of privatization, based on their own interests and sometimes the interests of the company. The right to form business associations was regulated by the First Companies Act of 1988. The legislative objective of the act was primarily to promote a more efficient use of social property, and in particular state property, and to remove obstacles to cooperation between business organizations and citizens. In the study, I also analyze the principles of law developed by judicial practice with the judgments handed down under the first Companies Act, the courts have attempted to pierce the seemingly impenetrable fabric of the corporate veil, and the chief executive officer, who violates the level of due diligence attached to the person holding the position in question has been held liable in a number of cases, applying the rules of the Company Act and the Civil Code.

Analysis of the Piercing Corporate Veil

Analysis of the Piercing Corporate Veil

The Jurisdictional Vacuum: Transnational Corporate Human Rights Claims in Common Law Home States

Abstract Private MNCs that operate in developing host states through overseas subsidiaries are regularly accused of human rights and environmental violations. Host state plaintiffs who then seek redress in home states where a corporate parent is domiciled face a number of doctrinal limitations. Focusing on the United States, the United Kingdom, and Canada, this Article outlines the current state of common law doctrines that consistently inhibit host state plaintiffs from advancing transnational home state claims. Cumulatively, the doctrines create a ‘jurisdictional vacuum,’ illustrating that domestic legal principles have not kept pace with commerce that spans across state borders. As international business has been able to structure itself to avoid the adjudicative reach of home state courts, harmed host state plaintiffs are unable to utilize domestic common laws to exact civil liability and obtain compensation. Comprised mainly of transnational claims that originate in commercial activities in the extractive and manufacturing industries, the vacuum’s doctrinal limitations fall within two broad categories. In the first category, home state courts have parochially interpreted corporate legal personality. Adhering to the corporate veil, they have disaggregated otherwise integrated transnational business operations in accordance with the entity theory of liability. They have also disaggregated MNC liability from government and individual liability by, respectively, holding onto ‘statist’ notions of international law and restrictively construing corporate personhood. In the second category, home state courts have taken restrained approaches to transnational corporate claims that implicate foreign relations or trade and investment or, otherwise, impinge on a host state’s judicial system. They have routinely invoked deferential and prudential doctrines, namely forum non conveniens and act of state, and restrictively interpreted the presumption against extraterritoriality. And when they have eschewed restraint in boomerang litigation, the end result has equally thwarted the ability of host state plaintiffs to procure compensatory remedies.