A Comparative Analysis Of Piercing The Corporate Veil

The purpose of the present dissertation is to analyze the extent of liability of shareholders for corporate debts,the so-called practice of piercing the corporate veil,in several legal systems the importance of which makes them relevant.The first part,after having introduced the functioning and relationships of limited liability and veil piercing,briefly analyses their evolution,as well as the evolution of key concepts such as legal person and legal personality.In doing so,even the ancient Roman system has been taken into account since it offers interesting historical insights for the present analysis.The second part refers to veil piercing legal definitions,doctrinal theories and jurisprudential interpretations upheld in some civil law systems.In this regard,the study focusses on the German,Italian and Chinese systems.The third part deals with some of the most relevant common law systems,namely the systems implemented in the United Kingdom(UK)and United States(US).Generally speaking,it was found that whereas the German,Italian and British systems seem to have adopted a restrictive approach towards veil piercing,in China and the US,the broad statutory provisions and interpretations facilitated the application of said practice.The fourth and final part provides an assessment of limited liability and veil piercing.Limited liability assessment is carried out also from an economic point of view,showing the positive and negative externalities which might arise in limiting shareholders' liabilities.In order to assess veil piercing,a comparison among the previously analyzed systems is made.The aim of this comparison is to facilitate the identification of the most relevant issues while extrapolating the most appropriate and innovative theories relating to the subject at hand.Therefore,three acts are taken into consideration,namely: acts of confusion between the personalities of shareholders and the corporation;acts of damage to creditors' interests;acts which induce the undercapitalization of the corporation.A comparison of the three acts is conducted,as well as a re-elaboration of veil piercing through abstract constructions in light of the empirical analysis.More specifically,aclassification of hypothetical cases of abuse – which are empirically gleaned – is provided,as well as definitions of abuse that represent the grounds to justify the disregard of shareholders' limited liabilities.In conclusion,concepts such as public policy,fairness and justice are applied in order to find a good way to regulate veil piercing by classifying and defining the concept of abuse of limited liability or generally of the corporate forms.This investigation might be considered relevant since it fulfils gaps in the existing literature.In other words–this is the assumption from where the present research started – some forms of corporations provide limited liability for their shareholders,therefore the legislator allows for a sort of immunity from debts.However,one might wonder: can limited liable shareholders enjoy limited liability when they abuse of the power granted to them and profit from their immunity from debts? Theoretically,shareholders should not abuse of this rights.However,there might be some confusion depending on the meaning attributed to the abuse of limited liability.Despite the jurisprudence best endeavours,no universal agreement on this issue has been reached.Quite to the contrary,different systems offer different definitions of this concept.Consequently,different solutions have been provided in order to justify the disregard(the piercing)of limited liability(the veil).In particular,the assumptions here analyzed and the outcomes show the relationship between limited liability and piercing of the corporate veil.Indeed,these two concepts are strictly related,though their relationship might look like a paradox.Veil piercing appears as a technique to hold liable the shareholders who wrongfully elude the debts of the company by abusing of their limited liability.The legislator would appear to have devised limited liability with the side effect of allowing shareholders to elude company debts,providing them with – as previously stated – a sort of immunity.A univocal interpretation of the abuse of limited liability might be the solution for such a paradox.In conclusion,it is believed that a correct definition of limited liability abuse can help to clarify when the legal limitations of liability upon natural persons or corporations may be disregarded and veil piercing applied.Therefore,the latter is to be viewed as an exception to a generalprinciple of law.More specifically speaking,the precondition to apply veil piercing should rely on the fact that the Court cannot base its decisions only on general principles,and a non-application of exceptional rules could lead to unfair judgments.