Liability Of Stockholders Research Articles

Piercing the Veil's Effect on Corporate Human Rights Violations & International Corporate Crime (Human Trafficking, Slavery, Etc)

Corporate limited liability laws (CLL) [the corporate veil (tCV)] is a major obstacle for implementation of UN and other covenants’ prevention and jurisprudence ex ante and ex post facto Corporate Human Rights Violations (CHRV) and International Corporate Crime (ICrC). I.d. aggregates the inability of States and International Bodies to farther establish unified e.g., Lex Non Scripta common law with adjudicative and prescriptive jurisdiction and to apply the Lex Scripta civil and criminal laws to reduce infringements of the human rights and impunity in cases of corporate violations and criminal acts. In this paper is argued that the change from Corporate Limited Liability (referred to as tCV) to Corporate Unlimited Liability (referred as PtCV) laws and thus criminalizing and adjudicating breaches of HR covenants and civil and criminal laws by corporate individuals, at prima facie should have a substantial preventative and sanctioning affect on reducing such CHRV and ICrC. I.d., the unambiguous correlation between CHRV and ICrC, (which in many occasions includes Human Trafficking, Slavery, Sex Trade, Child Labor, ext), which are accelerated by the 2001-2007 Recessions through expanding global poverty and inequality. Piercing the Corporate Veil (PtCV) and Enhancing Business & Contract Laws (eBCL) would raise the market security thus needed to establish fair market competition benefiting Small and Medium Enterprises and Investors, which have become major global employers: action that would have a general positive market effect. Id. Anyway with the current judicial practice, in most cases where there are grave personal injuries the court is willing to impute negligence to the parent company – especially where the subsidiary is thinly capitalized or appears to have been formed precisely to avoid liability. In contrast, courts are extremely reluctant to pierce the corporate veil in cases of purely pecuniary losses, namely where the creditors of a bankrupt corporation seek to reach the personal assets of the shareholders of the corporation. Eric Engle (2006). This is for the obvious reason that general financial liability of shareholders for all debts of a corporation would discourage investment in stocks with deleterious economic consequences. See, e.g. Krivo Indus. Supply Co. v. National Distillers & Chem. Corp., 483 F.2d 1098, 1102 (5th Cir. 1973)

The Impact of Extended Liability on Bank Runs: Evidence from the Panic of 1893

Prior to the Great Depression, regulators used extended liability to encourage conservative banking and enhance depositor protection. Using a difference-in-difference setup, we study how extended liability affected deposit withdrawals during the panic of 1893. We compare the capital and portfolio management of national banks that were subject to double liability (limited liability) to that of state banks that were subject to unlimited liability. We find that banks with stricter shareholder liability targeted a lower level of default risk and experienced smaller liquidity shocks. State banks held more secured loans and used less leverage than national banks. State banks also experienced less deposit withdrawals during the panic. Our findings show that extended liability contributed to financial stability by discouraging risky activities and mitigating runs.

Joint Liability of Shareholders for Taxes Owed by a Corporation: The New Greek Rule

This note examines a new rule imposing personal liability on shareholders for the outstanding taxes due by their corporation, in particular, whether the rule is efficient as a means of controlling opportunistic behaviour. As the new rule disregards the fundamental principle of limited liability, it has far-reaching implications for equity investment. In this regard, the note considers the potential cost of the rule and critically assesses the adequacy of legal safeguards provided for by the legislator.

Extended shareholder liability as a means to constrain moral hazard in insured banks

Abstract Extended liability for bank shareholders offers a possible method for mitigating moral hazard in insured banks. The dominant approach to maintaining financial stability seeks to constrain banks’ profit-maximizing responses to distorted incentives by means of ad hoc restrictions. By contrast, extended liability seeks to create healthier incentives. We examine how a variety of extended liability regimes worked historically, and consider leading concerns about their potential disadvantages. We conclude by discussing how extended liability avoids the difficulties of both ‘microprudential and ‘macroprudential’ approaches to systemic stability.

Paper Dragon Thieves

Developments in the law are making the corporate form more opaque and allowing the agents who animate it to escape individual accountability for their actions. The law now provides protection for agents to engage in widespread frauds that inflict massive harm on the public. This article challenges the academic orthodoxy that shareholder and director liability are enough to control agent behavior by developing a paper dragon analogy to focus on the importance of agents in corporate animation. Lack of agent accountability encourages the patterns of fraud that caused the financial crisis in which forty-five percent of the world’s wealth disappeared, and which continue to be repeated. The article reveals how making the corporate form more opaque has led to the destruction of corporate conspiracy charges for individuals and now the implosion of securities law as a method of disciplining agents. The article concludes with a call for both watching the paper dragon and the need to track the dancers who move its feet.

Georgian Supreme Court Redefines Personal Liability of Shareholders and Directors

On 6 May 2015, Georgian Supreme Court decided that shareholders and directors of a Limited Liability Company can be held jointly and personally liable for the tax obligations of the company. This Decision lays ground for the development of corporate veil-piercing doctrine in Georgia and at the same time extends creditors' right to have recourse to directors if the damage was incurred due to the breach of fiduciary duties.

RESPONSABILIDADE CIVIL DOS SÓCIOS NAS SOCIEDADES DO TIPO SIMPLES: PANORAMA GERAL E ASPECTOS CONTROVERSOS

O tema da responsabilidade civil dos sócios nas sociedades do tipo simples é particularmente relevante devido à aplicação subsidiária de seu regime jurídico aos demais tipos societários. Com isso em mente, o presente artigo propõe-se a apresentar um panorama sobre as responsabilidades dos sócios das sociedades do tipo simples, comumente denominada simples pura. Mais especificamente, busca-se sistematizar o conjunto de responsabilidades de natureza civil atribuídas aos sócios pelo Código Civil de 2002 (CC/2002), analisando-se ainda alguns aspectos polêmicos sobre o tema. Confere-se ênfase à divergência relativa à possibilidade legal de limitação das responsabilidades dos sócios por obrigações assumidas pelas sociedades do tipo simples, concluindo-se, a partir das investigações realizadas, que a limitação é permitida pelo CC/2002. Utilizou-se como metodologia a análise exploratória, baseada no estudo bibliográfico primário e secundário sobre o tema.

Toshiba v Commission: Parental Liability of a Minority Shareholder

The General Court annulled the fine imposed individually on Toshiba but confirmed the attribution of liability to the minority shareholder.

Extended Shareholder Liability as a Means to Constrain Moral Hazard in Insured Banks

We explore extended liability for bank shareholders as a method for mitigating moral hazard in insured banks. The dominant approach to maintaining financial stability employs piecemeal regulations concerning specific bank behaviors; we propose this difficult practice can be sidestepped by embracing a legal environment where banks face healthier incentives. We discuss the various kinds of extended liability regimes, show how they worked historically, and address several concerns about the potential downsides of these regimes. We conclude by discussing how extended liability can be used to avoid the difficulties of both ‘microprudential’ and ‘macroprudential’ approaches to systemic stability.

Introducing the One-Yuan Chinese Company: Impacts of the 2014 PRC Company Law Amendments on Shareholder Liability and Creditor Protection

This article critically engages the international debate on regulatory approaches to corporate creditor protection. It analyses recent reforms to the PRC Company Law in 2014, which removed minimum capital requirements for most limited liability companies in China. Using Chinese court cases, the article demonstrates that previous high mandatory minimum capital levels protected creditors by making shareholders who abused the capital rules personally liable for unpaid corporate debts. To ensure that removal of minimum capital levels does not lead to a spate of cases involving empty shell companies defrauding creditors, the Chinese government needs to fully and rapidly implement its proposed “Rules for Public Disclosure of Information by Enterprises”.

Cross-Border Investments in Undertakings and the Future of EU Company Law

The golden share case law and other recent case law of the ECJ form a basis for the development of a rule of internal market law that all rules of general company law that may have as an effect that investors are prevented or deterred from making cross-border investments in undertakings restrict the freedom of establishment and the free movement of capital. Relevant rules that potentially restrict the freedom of establishment and the free movement of capital are, inter alia, rules that allow shareholders to include deviations from the principle of 'one share, one vote' in articles of association, such as multiple voting rights. Other potentially restricting rules are employee co-decision rules and shareholder liability rules. If certain of these rules are judged to restrict the fundamental freedoms, this would necessitate a fundamental reconsideration of the existing company laws of the Member States from the perspective of restrictions to cross-border investments.

An Economic Analysis of Limited Shareholder Liability in Contractual Claims

This Article evaluates the economic basis for limited liability in contractual claims and proposes the introduction of unlimited liability for such claims against closely held corporations. It argues that the existing justifications for limited liability are unconvincing, and that unlimited liability is an economically more efficient rule for these corporations in light of savings in monitoring costs and more efficient allocation of risks. It rejects the frequently made argument that limited liability is justified in contractual claims because the contractual counterparty had a prior opportunity to negotiate for modifications. This argument demonstrates a fundamental misunderstanding of the nature of the bargaining process between a corporation and its various groups of contractual creditors, many of which are simply not in a position to negotiate for modifications to the default rule. It further examines some of the implementation problems for unlimited liability and suggests possible solutions for them.

Considerations on the Enforcement of the Doctrine of Piercing the Corporate Veil in Romania

The subject of the analysis circumscribes to the possibility of applying the principles of the doctrine piercing the corporate veil in the Romanian legal system, which has not yet met a unified legislative approach regarding the extension of shareholders’ liability. Starting from the legal personality the manner it is understood by the Anglo-American law, as the legal liability of shareholders in certain company forms provided with legal personality, it is argued that the latter and the liability are diluted within the actual perspective of the doctrine, which in fact prioritizes the protection of corporate creditors. Such approach in the Romanian law still acknowledges a limited applicability, generated by an insufficient normative framework, yet the theory of flagrant abuse could explain the regulation of extending the shareholder’s limited liability, to the extent to which this abuses of these limitations, while preserving the corporate personality.

Shareholder Liability: A New (Old) Way of Thinking About Financial Regulation

In the wake of a series of crises, international and domestic financial regulation has become highly complex and prescriptive, and oriented to leverage, liquidity, and capital ratios among financial institutions. This raises concerns over monitoring incentives, and over the increased role of deposit insurance, which insulates depositors and shareholders from some or most of the costs of an institution’s failure. However, until the mid-20th Century, banking regulation in the United States, Canada, the UK and elsewhere relied mostly on monitoring by shareholders and depositors. Central banks did not necessarily exist, and where they did, they did not necessarily have a modern lender-of-last-resort function. There were financial regulators, but depositors were expected to pay attention to the behaviour of the banks that held their savings. Senior bank managers often were exposed to liability for net losses incurred in the event that their financial institutions failed, as were other shareholders. The limited-liability corporate form, while it existed, did not apply to deposit-taking financial institutions. The reason was that owner-managers of banks often had incentives, and the capacity, to use for their own benefit the funds they held on behalf of others. Nonetheless, while bank runs, failures and crises occurred, bank depositors were nearly always made whole, and financial crises tended to be sharp, brief, and localized. Over the course of the 20th Century, shareholder liability, or double liability as it is often called, disappeared from the regulatory framework, to be displaced by deposit insurance, which has the political and economic attraction of reducing the incidence of bank runs and limiting their impact on depositors. In Canada, concerns over deposit insurance arise mostly at the provincial level. A number of provinces have expanded the size and range of deposits they cover, and British Columbia, for example, has introduced unlimited deposit insurance. This expansion will pose stability risks for the provinces that oversee the insurers, and for regulators and depositors outside those provinces. Implicit and explicit federal backstops for such insurance raise cross-province concerns. All of these features pose risks that deserve attention. At the national or international level, regulators should focus more on incentives. While reintroducing shareholder responsibility for bank liabilities in an insolvency seems implausible, other equity-based market instruments, such as equity recourse notes as proposed by Bulow and Klemperer (2013) could achieve the same effect. Irrespective of such sweeping change, there are clear domestic imperatives. Provincial deposit insurers should retrench, with respect to their coverage, and converge on a common standard, coincident with that offered at the federal level, for reasons discussed at the end of this review. Further, transitional expansion of federal deposit insurance to cover deposits at credit unions shifting from provincial to federal jurisdiction, announced in January 2014, should be withdrawn at the earliest opportunity.

Corporate Governance and Double Liability: Toward a Bank Shareholder-Orientated Model

The financial crisis of 2007-09 was interpreted by many as evidence that incentives of managers were not optimally aligned with interests of shareholders. As a result, a plethora of proposals have been put forward seeking to increase shareholder engagement. However, this shareholder engagement strategy only makes sense if risk appetite of bank shareholders is not socially excessive. The conventional for corporate governance presumes that costs of failure are largely internalized by firm and so are taken into account when shareholders determine their risk appetite. In this paper I argue, when applied to banks, this view is mistaken. Banks do not internalize costs of failure, hence risk appetite of bank shareholders is socially excessive. I show that shareholder pressure on their management to accept greater risk can help explain excessive risk-taking of banks. My analysis indicates that recent corporate governance reforms that attempt to tighten alignment of managerial and shareholder interests cannot be expected to address problem I identify. To adequately understand what policies should be explored, we must first recognize that excessive risk-taking is also partly a product of conventional of governance. I therefore propose a modification to that model: a regime of double bank shareholder liability that is triggered by bank failure. I discuss how this has potential to reduce bank shareholders’ risk appetite, and, make less likely, excessive risk-taking. Welfare improvement occurs because of heightened risk awareness and enhanced risk-taking controls, decreasing likelihood of failure. I introduce term the bank shareholder-orientated model of governance to characterize this modified approach.

Sustainable Corporations in Non-Financial Sectors Through Optimal Design of Executive Pay

It is commonplace in current legal scholarship that pay packages for executives that were not tied to the impact of these executives' policies on shareholder wealth maximization often caused harm to shareholder interests and their companies, especially in the long term. The no-pay-without-performance postulate is as old as the first global economic crisis of the 20thcentury – the deep depression. Since then, this postulate has been repeated and substantiated innumerous times by the majority of experts in corporate law and business economics, but without real success. There are, however, commentators who deny the existence of a link between skewed incentive pay, excessive risk-taking, and financial losses. They instead insist on the superiority of the traditional director-centric model of corporate governance, which would allegedly preserve the balance that has generally worked well between the limited role and limited liability of shareholders and the active role, fiduciary duties, and potential liability of managers, which allegedly renders additional executive pay regulation unnecessary.

Shareholder liability could tip the balance towards sustainable energy

Shareholder liability could tip the balance towards sustainable energy

Comparative Single-Member Companies of Germany, France and England: A Recommendation to Ethiopia

A single shareholder may establish a single-member company for a number of reasons. This unique business, among others, gives an opportunity to limit the sole shareholder's liability and it also provides an administrative simplicity to its establishment. Historically, as was the case in other countries,the Legislature in Germany, France and England generally were not ready to recognize a one-man corporation. The coming into effect of the 12th Company Law Directive, EC, 89/667/EEC, aimed principally at harmonization of company laws among members, changes the status qua and now one can easily witness the inclusion of such form of company in these countries. Ethiopia, a civil law country, allows two or more individuals to form a company and partnerships. As international investment and domestic trade grows domestically, the law recognizes two forms of companies-Private Limited Company and Share Company- and fail to provide a wider and happier business environment for stakeholders. Reviewing the Ethiopian Commercial Code of 1960 becomes imperative when one considers the advantages of a single-member company to investors, traders, and the country in general. This research focuses first on the meaning and its distinct characteristics,development, problems and legislative remedies and purposes of single-member companies. It will also dwell on how a one-man corporation is established, managed and generally regulated in Germany, France and England. The last part devoted to Ethiopian company law and recommendations.

The doctrine of piercing the corporate veil: Its legal and judicial recognition in Ethiopia

Upon acquisition of legal personality a company enjoys certain attributes such as limited liability. While the separate legal personality of a company enables it to enjoy rights and assume obligations quite different from its members, the limited liability of shareholders refers to the fact that the company alone is liable for its debts. However, such privilege of limited liability may not always exist when the legal personality of a company is abused and used for illegitimate or unlawful purposes and other reasons. This article examines some of the grounds by which the corporate veil can be pierced under Ethiopian law and the role of courts in recognizing the doctrine. Based on the analysis of the relevant legislative provisions and some court cases, it is found that Ethiopian company law, though not sufficient, provides some clear grounds of piercing the corporate veil and certain possible grounds which may call for the application of the doctrine. It is also argued that Ethiopian courts should apply the doctrine of piercing the corporate veil, through the purposive interpretation of the statutory provisions, if doing so produces equitable results and fairness.

‘A helpless class of shareholder’: newspapers and the City of Glasgow Bank failure

The 1878 failure of the City of Glasgow Bank (CGB) was a significant event in the history of auditing and became the catalyst to remove the unlimited liability of bank shareholders. This study assesses the role of newspapers in relation to the failure. Newspapers typically portrayed CGB shareholders as socially vulnerable and financially ruined investors with small shareholdings. The study tests the accuracy of this stereotyping by comparing newspaper accounts with archival data of shareholders’ personal characteristics and financial circumstances. The analyses show that, at failure, CGB shareholders typically had significant shareholdings and were very different from their newspaper stereotype. Post failure, despite extraordinary share calls, a small minority of shareholders entered bankruptcy administration and a large majority revealed signs of relative prosperity. These inconsistencies are reviewed in the context of the Victorian press and an investing middle class.