Limited Liability System, Law And Economics Analysis

The limited liability system----the problem of corporate personality independence, was fully disclosed in economic life from late 1800s to 1900, plays an important role in establishing a contemporary enterprise system . Bulter, the former president of Columbia University, once asserted in early 20^th century that limited company was the greatest invention, even compared with the invention of steam engine and electricity. Independent from economic life, however, corporate personality independence is like a two-edge sword. On one hand, it promotes the increase of investment and accumulations of economy, on the other hand, it provides the chances for stock-holders to abuse corporate personality. For the practical needs, America began to perfect the system, developed the principal of "piercing the veil of the corporation" upon exiting " corporate personality". It refers to a legal measure intended to realize equity and justice objectives, which requires stock-holders to take responsibilities for corporate creditors and public interests based on certain facts in certain law relations and hence prevents the abuse of corporate personality and protects the interests of creditors and the public. From then on, the principle of "piercing the veil of the corporation" was soon accepted by the other countries. Disregard the corporate personality is the development of the limited reliability. It is one question, but not two.Economic of law, is a theory which has integrated the theory, idea and method of microeconomics into the legal research, emphasizing the beneficial result as the primary value and the standard of evaluation. The beneficial result theory and the economic analysis of law is an important break-through in theoretical research of law and its methodology. Exercising of Methodological Individualism, Maximization Principle (also economic rationality), Opportunity Cost, Incentive Analysis, Social Cost Theory, we can use the principles of the law of economics to analyze the limited responsibilities system and the disregard of corporate personality, and we can know that what we may get the profit maximization.The whole article is divided into five parts, which expound the subject matter in details from the different perspectives. The first part of the article is prelude, which introduces the intend of why I wrote this article; The second part of the article demonstrates the economic of thelimited reliability system. First, I introduced the economic function of the limited reliability. Second , creditors are the superior venture bearings under the limited responsibilities. In this part, I demonstrate two points: the justice of the limited responsibilities and creditors are the superior venture bearings; Third , I demonstrate that limited responsibility system can promote transactions, and induce the transaction costs. Coase first bring forward the concept of transaction cost—the function fee of the economic system. I demonstrate the rationality of the limited responsibilities firstly. Secondly, I reason that limited responsibilities can promote transactions. Thirdly, I reason that limited responsibilities can induce the transaction costs, because: (1) limited responsibilities can make the creditors and the stock-holders have rational anticipation ; (2) limited responsibilities can make behavior repeated. The third part of the article, I demonstrate thatlimited can promote efficiency. In this part, I use Kaldor-----Hicksefficiency to reason the limited responsibilities firstly, then I reason that limited responsibilities can bring social welfare to the companies which is carving out. The fourth part of the article, I make an analysis on disregarding the corporate personality. (1) I introduce the background of the appearance of disregarding the corporate personality; (2) The applying of the disregard corporate personality; (3) Disregard the corporate can promote the social welfare;(4) Economic of the disregard of corporate personality;. The last part of the article is epilogue which is the summarization of the whole article.