Piercing the corporate veil among affiliated companies in the European Community and in the U.S. : A comparative analysis of U.S., German, and U.K. veil-piercing approaches

American Business Law Journal

Volumn 36, Issue 1, 1998, Pages 73-149

  Miller, Sandra K ^a  

^a NONE

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EID: 0041914535     PISSN: 00027766     EISSN: None     Source Type: Journal    
DOI: 10.1111/j.1744-1714.1998.tb01017.x     Document Type: Article

References (382)

1. See Jeffrey A. Tannenbaum, Among Fast-Growing Small Concerns, Exporters Expand The Most, Study Says, WALL ST. J., June 19, 1996, at B2 (reporting Coopers and Lybrand survey showing higher growth rates for small firms that export than those which operate exclusively within the United States. In a survey of 434 companies, the firms which exported internationally reported a growth of 31.2% as compared with 24.9% for non-exporters). See also Erskine B. Bowles, Big Rewards In The Global Marketplace For Small Businesses, 115 BUS. AM. 9 (1994). For purposes of this article, the term "public" company refers to a publicly-owned corporation whose stock may be owned by the public, and the "private" company or "close" corporation refers to a privately-owned corporation whose stock is not publicly owned or traded.
2. See Jeffrey A. Tannenbaum, Among Fast-Growing Small Concerns, Exporters Expand The Most, Study Says, WALL ST. J., June 19, 1996, at B2 (reporting Coopers and Lybrand survey showing higher growth rates for small firms that export than those which operate exclusively within the United States. In a survey of 434 companies, the firms which exported internationally reported a growth of 31.2% as compared with 24.9% for non-exporters). See also Erskine B. Bowles, Big Rewards In The Global Marketplace For Small Businesses, 115 BUS. AM. 9 (1994). For purposes of this article, the term "public" company refers to a publicly-owned corporation whose stock may be owned by the public, and the "private" company or "close" corporation refers to a privately-owned corporation whose stock is not publicly owned or traded.
3. According to one estimate, the annual employment growth of small and midsize companies in Europe from 1988 to 1995 has outdistanced the growth of large enterprises. See John Case, Is America Really Different?, 18 INC. 108, 109 (1996).
4. Id. (citing statistics gathered by the OECD which indicate that small companies are playing an important economic role in Europe. As of June, 1995, the percentage of "Micro Enterprises" with 1 to 10 employees was 93.3% in Europe and 78.2% in the United States. Such "Micro Enterprises" account for 31.8% of jobs in Europe and 12.2% of jobs in the U.S. The percentage of "Small Enterprises" with 11 to 99 employees was 6.2% in Europe and 20% in the United States, comprising 24.9% of the jobs in Europe and 27% of jobs in the United States). See Marco Biagi, Labour Law In Small and Medium-sized Enterprises: Flexibility or Adjustment?, 16 COMP. LAB. L. 439 (1995) (discussing the significant presence which small companies have in Europe and their importance as an employer. He indicates that small and medium-sized businesses defined as those with fewer than 499 employees represent more than 95% of all units of production in industrialized nations. Companies with nine workers employ approximately 41.3% of the working population in Spain; 40.3% in Italy; 35.7% in Portugal; 31% in Belgium; 22.3% in France; 18.2% in Germany; 19.1% in Great Britain; and 19.4% in Netherlands. While the statistics do not specify whether entities with nine or fewer employees are privately owned, it is quite likely that companies which employ as few as nine employees are not publicly-owned). Id. at 440.
5. Id. (citing statistics gathered by the OECD which indicate that small companies are playing an important economic role in Europe. As of June, 1995, the percentage of "Micro Enterprises" with 1 to 10 employees was 93.3% in Europe and 78.2% in the United States. Such "Micro Enterprises" account for 31.8% of jobs in Europe and 12.2% of jobs in the U.S. The percentage of "Small Enterprises" with 11 to 99 employees was 6.2% in Europe and 20% in the United States, comprising 24.9% of the jobs in Europe and 27% of jobs in the United States). See Marco Biagi, Labour Law In Small and Medium-sized Enterprises: Flexibility or Adjustment?, 16 COMP. LAB. L. 439 (1995) (discussing the significant presence which small companies have in Europe and their importance as an employer. He indicates that small and medium-sized businesses defined as those with fewer than 499 employees represent more than 95% of all units of production in industrialized nations. Companies with nine workers employ approximately 41.3% of the working population in Spain; 40.3% in Italy; 35.7% in Portugal; 31% in Belgium; 22.3% in France; 18.2% in Germany; 19.1% in Great Britain; and 19.4% in Netherlands. While the statistics do not specify whether entities with nine or fewer employees are privately owned, it is quite likely that companies which employ as few as nine employees are not publicly-owned). Id. at 440.
6. See infra text and accompanying notes 249-70.
7. See LUCIE A. CARSWELL & XAVIER DE SARRAU, LAW & BUSINESS IN THE EUROPEAN COMMUNITY, § 4.05 at 4-27 (1993) (discussing history of Fifth Directive). See also Draft Fifth Directive, 1991 O.J. (C138) 8; 1991 O.J. (176) 1.
8. See Sandra K. Miller, Minority Shareholder Oppression in the Private Company in The European Community: A Comparative Analysis of The German, U.K., and French Close Corporation Problem, 30 CORNELL INT'L L.J. 381 (1997) (providing an analysis of minority shareholder dispute resolution in Germany, the U.K. and France, and exploring the prospects of harmonizing this area of the law in the European Union).
9. A Draft Directive has been proposed by the EC Commission for a new business organization which will be governed by the statute and by the legislation of Member States. See 1991 O.J. (C 138) at 8; 1991 O.J. (C 176) at 1. See Vassil Breskovski, Directors' Duty of Care In Eastern Europe, 29 INT'L LAW. 77, 91 (1995) (providing an excellent discussion of attempts to harmonize corporate law within the European Community).
10. A Draft Directive has been proposed by the EC Commission for a new business organization which will be governed by the statute and by the legislation of Member States. See 1991 O.J. (C 138) at 8; 1991 O.J. (C 176) at 1. See Vassil Breskovski, Directors' Duty of Care In Eastern Europe, 29 INT'L LAW. 77, 91 (1995) (providing an excellent discussion of attempts to harmonize corporate law within the European Community).
11. See Salomon v. Salomon, [1897] A.C. 22 (establishing the separate entity principle in the context of an individual shareholder who owns a corporation).
12. See infra notes 37-41 and accompanying text (discussing the exceptional nature of veil-piercing under U.K. law).
13. See infra note 40.
14. Prof. Phillip I.Blumberg refers to entity law as the view that each corporation should be treated as a separate legal entity irrespective of its interrelationships with its affiliated corporations, whereas enterprise law recognizes the economic integration of related companies and treats the affiliated group as one legal unit. See Phillip I. Blumberg, The Corporate Entity In An Era Of Multinational Corporations, 15 DEL. J. CORP. L. 283 (1990). The definition of an "affiliated company" has no universal definition and varies with the legal context. For purposes of this article, the term "affiliated group" is generally meant to include related corporations such as a parent corporation which owns all or part of the stock of at least one other corporation, or a brother-sister group of companies in which the same shareholder owns stock of two or more companies. The term has other meanings in different contexts. For example, § 1504 of the Internal Revenue Code defines the affiliated group of corporations in part as a chain of includible corporations in which a common parent company owns both 80% of the value and 80% of the voting control of another corporation. See I.R.C. §1504(a) (West 1997).
15. See Adolf A. Berle, Jr., The Theory of Enterprise Entity, 47 COLUM. L. REV. 343 (1947).
16. See infra notes 96-169 and accompanying text (discussing the Konzernrecht).
17. See infra notes 129-44 and accompanying text (discussing the Contractual Konzern).
18. See infra notes 155-69 and accompanying text (discussing the Qualified De Facto Konzern).
19. CARSWELL & SARRAU, supra note 5, § 4.08 at 4-50 (indicating that discussion papers for a directive on the structure of groups of companies have been in circulation within Member States for some years. The reaction from industry has been hostile. The proposal was first developed in 1981 and then amended in 1984. The latest draft proposal for a Ninth Directive on the structure of groups of companies was circulated in 1984 (Doc.No. III/1639/84)). See Hiroshi Motomura, Protecting Outside Shareholders In A Corporate Subsidiary: a Comparative Look At The Private and Judicial Roles In The United States and Germany, 61 WIS. L. REV. 61 (1980) (providing that the German Stock Corporation Law which contains provisions for the imposition of liability on the corporate group of companies has served as a model for other European proposals from time to time). See infra notes 249-70 and accompanying text (discussing the feasibility of harmonizing liability issues in the European Community).
20. CARSWELL & SARRAU, supra note 5, § 4.08 at 4-50 (indicating that discussion papers for a directive on the structure of groups of companies have been in circulation within Member States for some years. The reaction from industry has been hostile. The proposal was first developed in 1981 and then amended in 1984. The latest draft proposal for a Ninth Directive on the structure of groups of companies was circulated in 1984 (Doc.No. III/1639/84)). See Hiroshi Motomura, Protecting Outside Shareholders In A Corporate Subsidiary: a Comparative Look At The Private and Judicial Roles In The United States and Germany, 61 WIS. L. REV. 61 (1980) (providing that the German Stock Corporation Law which contains provisions for the imposition of liability on the corporate group of companies has served as a model for other European proposals from time to time). See infra notes 249-70 and accompanying text (discussing the feasibility of harmonizing liability issues in the European Community).
21. CARSWELL & SARRAU, supra note 5, § 4.08 at 4-50.
22. See RICHARD SCAFFER ET AL., INTERNATIONAL BUSINESS LAW AND ITS ENVIRONMENT 18 (3d ed. 1996) (discussing the widespread use of separate corporations to conduct business operations in different countries); CLIFFORD CHANCE, DOING BUSINESS IN THE UNITED KINGDOM, § 18.03 at 18-39 (1995) (discussing the usefulness of subsidiaries under English law, and indicating that there are tax as well as business advantages to using a holding company with subsidiaries under U.K. law).
23. See Robert B. Thompson, Piercing The Corporate Veil: An Empirical Study, 76 CORNELL L. REV. 1036, 1036 (1991) (indicating that veil-piercing is among the most contested issues in the United States and the least understood).
24. See Berkey v. Third Ave. Rye, 155 N.E. 58, 61 (N.Y. 1927).
25. The conclusion that the volume of German and U.K. veil-piercing litigation is lower than in the United States is not based on an exhaustive empirical study of cases in each jurisdiction but, rather, reflects the author's impression based on a review of the literature and cases discussed infra at notes 46-219 and accompanying text.
26. See Blumberg, supra note 11, at 287 (indicating that statutory regulatory law has widely abandoned the traditional perception that business is conducted in the form of a single entity rather than as an enterprise. Blumberg indicates that it is necessary to abandon the separate entity concept in order to protect persons dealing with the modern group of affiliated companies).
27. See Melvin Aron Eisenberg, Megasubsidiaries: The Effect of Corporate Structure On Corporate Control, 84 HARV L. REV. 1577 (1971) (indicating that a significant portion of the country's business assets are held by subsidiaries).
28. Blumberg, supra note 11, at 283, 329 (indicating that in many areas of U.S. law, particularly in statutory law "control" has provided a workable standard for imparting legal duties. He discusses statutory rules which apply to controlled corporations in such areas as securities laws, tax laws, and state unitary tax laws. He also discusses the concept of the integrated enterprise under labor laws).
29. Thompson, supra note 20, at 1047 indicates that in an empirical study, veil-piercing was found only in close corporations or within corporate groups out of a data set which included 777 close corporation cases, 637 parent/subsidiary or sibling cases, and nine cases involving public corporations.
30. The possibility of using minimum capital standards as a means of addressing the corporate veil problem in the U.S. has not been analyzed in depth in the contemporary context of an international marketplace in which the corporate laws of many nations impose such minimum standards. See David H. Barber, Piercing the Corporate Veil, 17 WILLAMETTE L. REV. 371, 395 (1981) (considering the adoption of minimum capital standards in the context of U.S. law).
31. BEAUFORT, 1 PALMER'S COMPANY LAW § 2.1519 (Jeoffrey Morse et al. eds., 25th ed. 1992) (indicating that the veil-piercing doctrine gives the courts considerable discretion and enables them to do justice and to decide individual cases in accordance with equitable considerations); F. HODGE O'NEIL & ROBERT THOMPSON, O'NEAL'S CLOSE CORPORATIONS, § 1.10, at 48 (3d ed. 1997) (indicating that piercing the corporate veil is an equitable doctrine that is applied to particular situations and the fact that a corporation's separateness is disregarded in one situation does not mean that the corporation ceases to exist or that its separateness will not be respected in other situations); Carston Alting, Piercing The Corporate Veil in American and German Law-Liability of Individuals and Entities: A Comparative View, 2 TULSA J. COMP. & INT'L L. 187, 199 (1984) (stating that the general statements of the German courts are not very conclusive, but that they make clear that piercing is decided on a case by case basis).
32. BEAUFORT, 1 PALMER'S COMPANY LAW § 2.1519 (Jeoffrey Morse et al. eds., 25th ed. 1992) (indicating that the veil-piercing doctrine gives the courts considerable discretion and enables them to do justice and to decide individual cases in accordance with equitable considerations); F. HODGE O'NEIL & ROBERT THOMPSON, O'NEAL'S CLOSE CORPORATIONS, § 1.10, at 48 (3d ed. 1997) (indicating that piercing the corporate veil is an equitable doctrine that is applied to particular situations and the fact that a corporation's separateness is disregarded in one situation does not mean that the corporation ceases to exist or that its separateness will not be respected in other situations); Carston Alting, Piercing The Corporate Veil in American and German Law-Liability of Individuals and Entities: A Comparative View, 2 TULSA J. COMP. & INT'L L. 187, 199 (1984) (stating that the general statements of the German courts are not very conclusive, but that they make clear that piercing is decided on a case by case basis).
33. BEAUFORT, supra note 28, at § 2.1519 (emphasizing that the doctrine of corporate limited liability under U.K. law is the principle, and that instances of piercing the corporate veil are the exceptions, though their number is growing).
34. Veil-piercing in the U.S. has also been described as an exception to the general rule. See Amfac Foods, Inc., 654 P.2d 1092, 1098 (Ore. 1982) (referring to the disregard of a legally established corporate entity as an extraordinary remedy).
35. Unlike U.S. or U.K. law, German law provides a statutory codification referred to as the Konzernrecht or law of controlled companies which holds a controlling corporation liable for the obligations of a controlled corporation in certain circumstances. See infra notes 119-28 and accompanying text (discussing limited liability under German law).
36. Thompson, supra note 20 (reporting initially 2,000 cases in an empirical study using Westlaw which employed the terms "piercing the corporate veil" and "disregard the corporate entity").
37. O'NEILL & THOMPSON, supra note 28, § 1.10 , at 47-48 providing: [T]he separate personality of the corporation will be disregarded or the corporate veil pierced whenever the separateness of the corporate form is employed to evade an existing obligation, circumvent a statute, perpetuate a fraud or crime or generally commit an injustice or gain an unfair advantage.
38. See O'NEILL & THOMPSON, supra note 28, § 1.10, at 47-48 (indicating that courts seldom interfere with the bargain reached by the parties unless there is some reason to invalidate the agreement such as fraud or something approaching fraud. Fraud as well as veil-piercing arguments have been advanced in the same case); see Anderson v. Kennebec River Pulp & Paper Co., 433 A.2d 752 (Me. 1981) (involving an attempt to hold a parent company liable for salary owed by its subsidiary when the corporate officers allegedly promised plaintiffs that the parent company would stand behind their salaries despite financial difficulties); African Metals Corp. v. Bullowa, 41 N.E.2d 466 (N.Y. 1942) (involving the use of an undercapitalized corporation in a scheme to sell nickel cathodes which turned out to be scrap iron); Bucyrus-Erie Co. v. Gen. Prod. Corp., 643 F.2d 413 (Ohio App. 1981) (alleging fraudulent misrepresentation of a machinery contract as wel as circumstances justifying veil-piercing); Truckweld Equip. Co. v. Olson, 618 P.2d 1017, 1021(Wash. App. 1980) (indicating that typically the injustice triggering veil-piercing is fraud, misrepresentation, or some form of manipulation). See also Sprecher v. Weston's Bar, 253 N.W.2d 493, 498 (Wis. 1977) (indicating that the corporate fiction may be disregarded if it is used to commit fraud).
39. See Brunswick Corp. v. Waxman, 459 F. Supp. 1222 (E.D.N.Y. 1978) (refusing to pierce the corporate veil where the defendant corporation was formed and operated as a no-asset corporation. The plaintiff was not misled into doing business with the no-asset corporation and was not wronged. The opinion underscores the importance of fraudulent or misleading conduct in supporting veil-piercing); DeWitt Truck Brokers v. W. Ray Flemming Fruit Co., 540 F.2d 681 (4th Cir. 1976) (indicating that disregarding the corporate shield is justified where the corporation is undercapitalized, formalities are disregarded, there has been nonpayment of dividends, siphoning off of corporation's funds by the dominant sharheholder, and nonfunctioning of corporate officers and directors) Lowendahl v. Baltimore & O. Ry., 6 N.E.2d 56 (N.Y. 1936) (holding that the defendants were not liable to plaintiffs on the theory that their corporation was their agent or instrumentality because there was no evidence that they knew of the plaintiffs claim at the time they organized the corporation or used the corporation to defraud or evade existing obligations); Walkovszky v. Carlton, 223 N.E.2d 6 (N.Y. 1966) (upholding the defendant's right to incorporate ten taxi cab corporations in the conduct of business and refusing to pierce the corporate veil where the defendant had the legally required amount of insurance. The court emphasized that there was nothing illicit or fraudulent about the use of multiple corporations); Thompson, supra note 20, at 1064 (finding that in a total of 169 cases involving misrepresentation, the courts pierced the corporate veil in 159, at a rate of 94%). For further discussion, see O'NEILL & THOMPSON, supra note 28, § 1.10, at 47-48, nn.3-5.
40. Jeffrey M. Colon, Changing U.S. Tax Jurisdiction: Expatriates, Immigrants, and The Need For A Coherent Tax Policy, 34 SAN DIEGO L. REV. 1 (1997) (including a discussion of piercing the corporate veil of a foreign corporation where corporate formalities have not been observed); Brian A. Comer, The Bi-Annual Bankruptcy Symposium: Ethics Issues: Student Works: Piercing The Corporate Veil in Wilson v. Friedberg, 48 S.C. L. REV. 905 (1997); Mark E. McKane, Operator Liability For Parent Corporations Under CERCLA: A Return To Basics, 91 Nw. U. L. REV. 1642 (1997) (discussing piercing the corporate veil among affiliated corporations); Derek Mohr, On The Application of CERCLA To Noncorporate Entities: An Analysis of the Redwing Decisions, 47 CASE W. RES. L. REV. 1157 (1997) (discussing the imposition of liability upon the partners in a limited partnership under CERCLA); William Hoffman Pincus, Piercing The Corporate Veil In Maritime Cases, 28 J. MAR. L. & COM. 341 (1997); John Salma, Professional Athletes Taxed To Death? Even They Can Strike Out!!!, 4 SPORTS L.J. 255 (1997) (discussing the prospect of piercing the corporate veil of corporations formed by athletes); Howard L. Schecter, Mergers and Acquisitions Symposium: Selected Risk Issues in Merger and Acquisition Transactions, 51 U. MIAMI L. REV. 719 (1997) (discussing risks relating to liabilities in connection with mergers and acquisitions); Cindy A. Schipani, Environmental Law and Business In The 21st Century: Infiltration of Enterprise Theory Into Environmental Jurisprudence, 22 IOWA J. CORP. L. 599 (1997) (discussing piercing the corporate veil to impose liability upon the parent corporation which dominates its subsidiaries); Karin Schwindt, Limited Liability Companies: Issues in Member Liability, 44 UCLA L. REV. 1541 (1997) (discussing the scope of member liability in connection with limited liability companies); Thompson, supra note 20, 1036, 1048 (indicating that in a sample of 1583 cases, there were decisions to pierce in 636 cases or 40.18%); Robert B. Thompson, The Limits of Liability In The New Limited Liability Entities, 32 WAKE FOREST L. REV. 1, at 6, n.32 (1997) (indicating that plaintiffs are veil piercing in the context of new business entities such as limited liability companies); Romney v. Lin: ERISA Preemption of 630 of New York's Business Corporation Law, 71 ST. JOHN'S L. REV. 691(1997) (discussing personal liability under ERISA).
41. Jeffrey M. Colon, Changing U.S. Tax Jurisdiction: Expatriates, Immigrants, and The Need For A Coherent Tax Policy, 34 SAN DIEGO L. REV. 1 (1997) (including a discussion of piercing the corporate veil of a foreign corporation where corporate formalities have not been observed); Brian A. Comer, The Bi-Annual Bankruptcy Symposium: Ethics Issues: Student Works: Piercing The Corporate Veil in Wilson v. Friedberg, 48 S.C. L. REV. 905 (1997); Mark E. McKane, Operator Liability For Parent Corporations Under CERCLA: A Return To Basics, 91 Nw. U. L. REV. 1642 (1997) (discussing piercing the corporate veil among affiliated corporations); Derek Mohr, On The Application of CERCLA To Noncorporate Entities: An Analysis of the Redwing Decisions, 47 CASE W. RES. L. REV. 1157 (1997) (discussing the imposition of liability upon the partners in a limited partnership under CERCLA); William Hoffman Pincus, Piercing The Corporate Veil In Maritime Cases, 28 J. MAR. L. & COM. 341 (1997); John Salma, Professional Athletes Taxed To Death? Even They Can Strike Out!!!, 4 SPORTS L.J. 255 (1997) (discussing the prospect of piercing the corporate veil of corporations formed by athletes); Howard L. Schecter, Mergers and Acquisitions Symposium: Selected Risk Issues in Merger and Acquisition Transactions, 51 U. MIAMI L. REV. 719 (1997) (discussing risks relating to liabilities in connection with mergers and acquisitions); Cindy A. Schipani, Environmental Law and Business In The 21st Century: Infiltration of Enterprise Theory Into Environmental Jurisprudence, 22 IOWA J. CORP. L. 599 (1997) (discussing piercing the corporate veil to impose liability upon the parent corporation which dominates its subsidiaries); Karin Schwindt, Limited Liability Companies: Issues in Member Liability, 44 UCLA L. REV. 1541 (1997) (discussing the scope of member liability in connection with limited liability companies); Thompson, supra note 20, 1036, 1048 (indicating that in a sample of 1583 cases, there were decisions to pierce in 636 cases or 40.18%); Robert B. Thompson, The Limits of Liability In The New Limited Liability Entities, 32 WAKE FOREST L. REV. 1, at 6, n.32 (1997) (indicating that plaintiffs are veil piercing in the context of new business entities such as limited liability companies); Romney v. Lin: ERISA Preemption of 630 of New York's Business Corporation Law, 71 ST. JOHN'S L. REV. 691(1997) (discussing personal liability under ERISA).
42. Jeffrey M. Colon, Changing U.S. Tax Jurisdiction: Expatriates, Immigrants, and The Need For A Coherent Tax Policy, 34 SAN DIEGO L. REV. 1 (1997) (including a discussion of piercing the corporate veil of a foreign corporation where corporate formalities have not been observed); Brian A. Comer, The Bi-Annual Bankruptcy Symposium: Ethics Issues: Student Works: Piercing The Corporate Veil in Wilson v. Friedberg, 48 S.C. L. REV. 905 (1997); Mark E. McKane, Operator Liability For Parent Corporations Under CERCLA: A Return To Basics, 91 Nw. U. L. REV. 1642 (1997) (discussing piercing the corporate veil among affiliated corporations); Derek Mohr, On The Application of CERCLA To Noncorporate Entities: An Analysis of the Redwing Decisions, 47 CASE W. RES. L. REV. 1157 (1997) (discussing the imposition of liability upon the partners in a limited partnership under CERCLA); William Hoffman Pincus, Piercing The Corporate Veil In Maritime Cases, 28 J. MAR. L. & COM. 341 (1997); John Salma, Professional Athletes Taxed To Death? Even They Can Strike Out!!!, 4 SPORTS L.J. 255 (1997) (discussing the prospect of piercing the corporate veil of corporations formed by athletes); Howard L. Schecter, Mergers and Acquisitions Symposium: Selected Risk Issues in Merger and Acquisition Transactions, 51 U. MIAMI L. REV. 719 (1997) (discussing risks relating to liabilities in connection with mergers and acquisitions); Cindy A. Schipani, Environmental Law and Business In The 21st Century: Infiltration of Enterprise Theory Into Environmental Jurisprudence, 22 IOWA J. CORP. L. 599 (1997) (discussing piercing the corporate veil to impose liability upon the parent corporation which dominates its subsidiaries); Karin Schwindt, Limited Liability Companies: Issues in Member Liability, 44 UCLA L. REV. 1541 (1997) (discussing the scope of member liability in connection with limited liability companies); Thompson, supra note 20, 1036, 1048 (indicating that in a sample of 1583 cases, there were decisions to pierce in 636 cases or 40.18%); Robert B. Thompson, The Limits of Liability In The New Limited Liability Entities, 32 WAKE FOREST L. REV. 1, at 6, n.32 (1997) (indicating that plaintiffs are veil piercing in the context of new business entities such as limited liability companies); Romney v. Lin: ERISA Preemption of 630 of New York's Business Corporation Law, 71 ST. JOHN'S L. REV. 691(1997) (discussing personal liability under ERISA).
43. Jeffrey M. Colon, Changing U.S. Tax Jurisdiction: Expatriates, Immigrants, and The Need For A Coherent Tax Policy, 34 SAN DIEGO L. REV. 1 (1997) (including a discussion of piercing the corporate veil of a foreign corporation where corporate formalities have not been observed); Brian A. Comer, The Bi-Annual Bankruptcy Symposium: Ethics Issues: Student Works: Piercing The Corporate Veil in Wilson v. Friedberg, 48 S.C. L. REV. 905 (1997); Mark E. McKane, Operator Liability For Parent Corporations Under CERCLA: A Return To Basics, 91 Nw. U. L. REV. 1642 (1997) (discussing piercing the corporate veil among affiliated corporations); Derek Mohr, On The Application of CERCLA To Noncorporate Entities: An Analysis of the Redwing Decisions, 47 CASE W. RES. L. REV. 1157 (1997) (discussing the imposition of liability upon the partners in a limited partnership under CERCLA); William Hoffman Pincus, Piercing The Corporate Veil In Maritime Cases, 28 J. MAR. L. & COM. 341 (1997); John Salma, Professional Athletes Taxed To Death? Even They Can Strike Out!!!, 4 SPORTS L.J. 255 (1997) (discussing the prospect of piercing the corporate veil of corporations formed by athletes); Howard L. Schecter, Mergers and Acquisitions Symposium: Selected Risk Issues in Merger and Acquisition Transactions, 51 U. MIAMI L. REV. 719 (1997) (discussing risks relating to liabilities in connection with mergers and acquisitions); Cindy A. Schipani, Environmental Law and Business In The 21st Century: Infiltration of Enterprise Theory Into Environmental Jurisprudence, 22 IOWA J. CORP. L. 599 (1997) (discussing piercing the corporate veil to impose liability upon the parent corporation which dominates its subsidiaries); Karin Schwindt, Limited Liability Companies: Issues in Member Liability, 44 UCLA L. REV. 1541 (1997) (discussing the scope of member liability in connection with limited liability companies); Thompson, supra note 20, 1036, 1048 (indicating that in a sample of 1583 cases, there were decisions to pierce in 636 cases or 40.18%); Robert B. Thompson, The Limits of Liability In The New Limited Liability Entities, 32 WAKE FOREST L. REV. 1, at 6, n.32 (1997) (indicating that plaintiffs are veil piercing in the context of new business entities such as limited liability companies); Romney v. Lin: ERISA Preemption of 630 of New York's Business Corporation Law, 71 ST. JOHN'S L. REV. 691(1997) (discussing personal liability under ERISA).
44. Jeffrey M. Colon, Changing U.S. Tax Jurisdiction: Expatriates, Immigrants, and The Need For A Coherent Tax Policy, 34 SAN DIEGO L. REV. 1 (1997) (including a discussion of piercing the corporate veil of a foreign corporation where corporate formalities have not been observed); Brian A. Comer, The Bi-Annual Bankruptcy Symposium: Ethics Issues: Student Works: Piercing The Corporate Veil in Wilson v. Friedberg, 48 S.C. L. REV. 905 (1997); Mark E. McKane, Operator Liability For Parent Corporations Under CERCLA: A Return To Basics, 91 Nw. U. L. REV. 1642 (1997) (discussing piercing the corporate veil among affiliated corporations); Derek Mohr, On The Application of CERCLA To Noncorporate Entities: An Analysis of the Redwing Decisions, 47 CASE W. RES. L. REV. 1157 (1997) (discussing the imposition of liability upon the partners in a limited partnership under CERCLA); William Hoffman Pincus, Piercing The Corporate Veil In Maritime Cases, 28 J. MAR. L. & COM. 341 (1997); John Salma, Professional Athletes Taxed To Death? Even They Can Strike Out!!!, 4 SPORTS L.J. 255 (1997) (discussing the prospect of piercing the corporate veil of corporations formed by athletes); Howard L. Schecter, Mergers and Acquisitions Symposium: Selected Risk Issues in Merger and Acquisition Transactions, 51 U. MIAMI L. REV. 719 (1997) (discussing risks relating to liabilities in connection with mergers and acquisitions); Cindy A. Schipani, Environmental Law and Business In The 21st Century: Infiltration of Enterprise Theory Into Environmental Jurisprudence, 22 IOWA J. CORP. L. 599 (1997) (discussing piercing the corporate veil to impose liability upon the parent corporation which dominates its subsidiaries); Karin Schwindt, Limited Liability Companies: Issues in Member Liability, 44 UCLA L. REV. 1541 (1997) (discussing the scope of member liability in connection with limited liability companies); Thompson, supra note 20, 1036, 1048 (indicating that in a sample of 1583 cases, there were decisions to pierce in 636 cases or 40.18%); Robert B. Thompson, The Limits of Liability In The New Limited Liability Entities, 32 WAKE FOREST L. REV. 1, at 6, n.32 (1997) (indicating that plaintiffs are veil piercing in the context of new business entities such as limited liability companies); Romney v. Lin: ERISA Preemption of 630 of New York's Business Corporation Law, 71 ST. JOHN'S L. REV. 691(1997) (discussing personal liability under ERISA).
45. Jeffrey M. Colon, Changing U.S. Tax Jurisdiction: Expatriates, Immigrants, and The Need For A Coherent Tax Policy, 34 SAN DIEGO L. REV. 1 (1997) (including a discussion of piercing the corporate veil of a foreign corporation where corporate formalities have not been observed); Brian A. Comer, The Bi-Annual Bankruptcy Symposium: Ethics Issues: Student Works: Piercing The Corporate Veil in Wilson v. Friedberg, 48 S.C. L. REV. 905 (1997); Mark E. McKane, Operator Liability For Parent Corporations Under CERCLA: A Return To Basics, 91 Nw. U. L. REV. 1642 (1997) (discussing piercing the corporate veil among affiliated corporations); Derek Mohr, On The Application of CERCLA To Noncorporate Entities: An Analysis of the Redwing Decisions, 47 CASE W. RES. L. REV. 1157 (1997) (discussing the imposition of liability upon the partners in a limited partnership under CERCLA); William Hoffman Pincus, Piercing The Corporate Veil In Maritime Cases, 28 J. MAR. L. & COM. 341 (1997); John Salma, Professional Athletes Taxed To Death? Even They Can Strike Out!!!, 4 SPORTS L.J. 255 (1997) (discussing the prospect of piercing the corporate veil of corporations formed by athletes); Howard L. Schecter, Mergers and Acquisitions Symposium: Selected Risk Issues in Merger and Acquisition Transactions, 51 U. MIAMI L. REV. 719 (1997) (discussing risks relating to liabilities in connection with mergers and acquisitions); Cindy A. Schipani, Environmental Law and Business In The 21st Century: Infiltration of Enterprise Theory Into Environmental Jurisprudence, 22 IOWA J. CORP. L. 599 (1997) (discussing piercing the corporate veil to impose liability upon the parent corporation which dominates its subsidiaries); Karin Schwindt, Limited Liability Companies: Issues in Member Liability, 44 UCLA L. REV. 1541 (1997) (discussing the scope of member liability in connection with limited liability companies); Thompson, supra note 20, 1036, 1048 (indicating that in a sample of 1583 cases, there were decisions to pierce in 636 cases or 40.18%); Robert B. Thompson, The Limits of Liability In The New Limited Liability Entities, 32 WAKE FOREST L. REV. 1, at 6, n.32 (1997) (indicating that plaintiffs are veil piercing in the context of new business entities such as limited liability companies); Romney v. Lin: ERISA Preemption of 630 of New York's Business Corporation Law, 71 ST. JOHN'S L. REV. 691(1997) (discussing personal liability under ERISA).
46. Jeffrey M. Colon, Changing U.S. Tax Jurisdiction: Expatriates, Immigrants, and The Need For A Coherent Tax Policy, 34 SAN DIEGO L. REV. 1 (1997) (including a discussion of piercing the corporate veil of a foreign corporation where corporate formalities have not been observed); Brian A. Comer, The Bi-Annual Bankruptcy Symposium: Ethics Issues: Student Works: Piercing The Corporate Veil in Wilson v. Friedberg, 48 S.C. L. REV. 905 (1997); Mark E. McKane, Operator Liability For Parent Corporations Under CERCLA: A Return To Basics, 91 Nw. U. L. REV. 1642 (1997) (discussing piercing the corporate veil among affiliated corporations); Derek Mohr, On The Application of CERCLA To Noncorporate Entities: An Analysis of the Redwing Decisions, 47 CASE W. RES. L. REV. 1157 (1997) (discussing the imposition of liability upon the partners in a limited partnership under CERCLA); William Hoffman Pincus, Piercing The Corporate Veil In Maritime Cases, 28 J. MAR. L. & COM. 341 (1997); John Salma, Professional Athletes Taxed To Death? Even They Can Strike Out!!!, 4 SPORTS L.J. 255 (1997) (discussing the prospect of piercing the corporate veil of corporations formed by athletes); Howard L. Schecter, Mergers and Acquisitions Symposium: Selected Risk Issues in Merger and Acquisition Transactions, 51 U. MIAMI L. REV. 719 (1997) (discussing risks relating to liabilities in connection with mergers and acquisitions); Cindy A. Schipani, Environmental Law and Business In The 21st Century: Infiltration of Enterprise Theory Into Environmental Jurisprudence, 22 IOWA J. CORP. L. 599 (1997) (discussing piercing the corporate veil to impose liability upon the parent corporation which dominates its subsidiaries); Karin Schwindt, Limited Liability Companies: Issues in Member Liability, 44 UCLA L. REV. 1541 (1997) (discussing the scope of member liability in connection with limited liability companies); Thompson, supra note 20, 1036, 1048 (indicating that in a sample of 1583 cases, there were decisions to pierce in 636 cases or 40.18%); Robert B. Thompson, The Limits of Liability In The New Limited Liability Entities, 32 WAKE FOREST L. REV. 1, at 6, n.32 (1997) (indicating that plaintiffs are veil piercing in the context of new business entities such as limited liability companies); Romney v. Lin: ERISA Preemption of 630 of New York's Business Corporation Law, 71 ST. JOHN'S L. REV. 691(1997) (discussing personal liability under ERISA).
47. Jeffrey M. Colon, Changing U.S. Tax Jurisdiction: Expatriates, Immigrants, and The Need For A Coherent Tax Policy, 34 SAN DIEGO L. REV. 1 (1997) (including a discussion of piercing the corporate veil of a foreign corporation where corporate formalities have not been observed); Brian A. Comer, The Bi-Annual Bankruptcy Symposium: Ethics Issues: Student Works: Piercing The Corporate Veil in Wilson v. Friedberg, 48 S.C. L. REV. 905 (1997); Mark E. McKane, Operator Liability For Parent Corporations Under CERCLA: A Return To Basics, 91 Nw. U. L. REV. 1642 (1997) (discussing piercing the corporate veil among affiliated corporations); Derek Mohr, On The Application of CERCLA To Noncorporate Entities: An Analysis of the Redwing Decisions, 47 CASE W. RES. L. REV. 1157 (1997) (discussing the imposition of liability upon the partners in a limited partnership under CERCLA); William Hoffman Pincus, Piercing The Corporate Veil In Maritime Cases, 28 J. MAR. L. & COM. 341 (1997); John Salma, Professional Athletes Taxed To Death? Even They Can Strike Out!!!, 4 SPORTS L.J. 255 (1997) (discussing the prospect of piercing the corporate veil of corporations formed by athletes); Howard L. Schecter, Mergers and Acquisitions Symposium: Selected Risk Issues in Merger and Acquisition Transactions, 51 U. MIAMI L. REV. 719 (1997) (discussing risks relating to liabilities in connection with mergers and acquisitions); Cindy A. Schipani, Environmental Law and Business In The 21st Century: Infiltration of Enterprise Theory Into Environmental Jurisprudence, 22 IOWA J. CORP. L. 599 (1997) (discussing piercing the corporate veil to impose liability upon the parent corporation which dominates its subsidiaries); Karin Schwindt, Limited Liability Companies: Issues in Member Liability, 44 UCLA L. REV. 1541 (1997) (discussing the scope of member liability in connection with limited liability companies); Thompson, supra note 20, 1036, 1048 (indicating that in a sample of 1583 cases, there were decisions to pierce in 636 cases or 40.18%); Robert B. Thompson, The Limits of Liability In The New Limited Liability Entities, 32 WAKE FOREST L. REV. 1, at 6, n.32 (1997) (indicating that plaintiffs are veil piercing in the context of new business entities such as limited liability companies); Romney v. Lin: ERISA Preemption of 630 of New York's Business Corporation Law, 71 ST. JOHN'S L. REV. 691(1997) (discussing personal liability under ERISA).
48. Jeffrey M. Colon, Changing U.S. Tax Jurisdiction: Expatriates, Immigrants, and The Need For A Coherent Tax Policy, 34 SAN DIEGO L. REV. 1 (1997) (including a discussion of piercing the corporate veil of a foreign corporation where corporate formalities have not been observed); Brian A. Comer, The Bi-Annual Bankruptcy Symposium: Ethics Issues: Student Works: Piercing The Corporate Veil in Wilson v. Friedberg, 48 S.C. L. REV. 905 (1997); Mark E. McKane, Operator Liability For Parent Corporations Under CERCLA: A Return To Basics, 91 Nw. U. L. REV. 1642 (1997) (discussing piercing the corporate veil among affiliated corporations); Derek Mohr, On The Application of CERCLA To Noncorporate Entities: An Analysis of the Redwing Decisions, 47 CASE W. RES. L. REV. 1157 (1997) (discussing the imposition of liability upon the partners in a limited partnership under CERCLA); William Hoffman Pincus, Piercing The Corporate Veil In Maritime Cases, 28 J. MAR. L. & COM. 341 (1997); John Salma, Professional Athletes Taxed To Death? Even They Can Strike Out!!!, 4 SPORTS L.J. 255 (1997) (discussing the prospect of piercing the corporate veil of corporations formed by athletes); Howard L. Schecter, Mergers and Acquisitions Symposium: Selected Risk Issues in Merger and Acquisition Transactions, 51 U. MIAMI L. REV. 719 (1997) (discussing risks relating to liabilities in connection with mergers and acquisitions); Cindy A. Schipani, Environmental Law and Business In The 21st Century: Infiltration of Enterprise Theory Into Environmental Jurisprudence, 22 IOWA J. CORP. L. 599 (1997) (discussing piercing the corporate veil to impose liability upon the parent corporation which dominates its subsidiaries); Karin Schwindt, Limited Liability Companies: Issues in Member Liability, 44 UCLA L. REV. 1541 (1997) (discussing the scope of member liability in connection with limited liability companies); Thompson, supra note 20, 1036, 1048 (indicating that in a sample of 1583 cases, there were decisions to pierce in 636 cases or 40.18%); Robert B. Thompson, The Limits of Liability In The New Limited Liability Entities, 32 WAKE FOREST L. REV. 1, at 6, n.32 (1997) (indicating that plaintiffs are veil piercing in the context of new business entities such as limited liability companies); Romney v. Lin: ERISA Preemption of 630 of New York's Business Corporation Law, 71 ST. JOHN'S L. REV. 691(1997) (discussing personal liability under ERISA).
49. Jeffrey M. Colon, Changing U.S. Tax Jurisdiction: Expatriates, Immigrants, and The Need For A Coherent Tax Policy, 34 SAN DIEGO L. REV. 1 (1997) (including a discussion of piercing the corporate veil of a foreign corporation where corporate formalities have not been observed); Brian A. Comer, The Bi-Annual Bankruptcy Symposium: Ethics Issues: Student Works: Piercing The Corporate Veil in Wilson v. Friedberg, 48 S.C. L. REV. 905 (1997); Mark E. McKane, Operator Liability For Parent Corporations Under CERCLA: A Return To Basics, 91 Nw. U. L. REV. 1642 (1997) (discussing piercing the corporate veil among affiliated corporations); Derek Mohr, On The Application of CERCLA To Noncorporate Entities: An Analysis of the Redwing Decisions, 47 CASE W. RES. L. REV. 1157 (1997) (discussing the imposition of liability upon the partners in a limited partnership under CERCLA); William Hoffman Pincus, Piercing The Corporate Veil In Maritime Cases, 28 J. MAR. L. & COM. 341 (1997); John Salma, Professional Athletes Taxed To Death? Even They Can Strike Out!!!, 4 SPORTS L.J. 255 (1997) (discussing the prospect of piercing the corporate veil of corporations formed by athletes); Howard L. Schecter, Mergers and Acquisitions Symposium: Selected Risk Issues in Merger and Acquisition Transactions, 51 U. MIAMI L. REV. 719 (1997) (discussing risks relating to liabilities in connection with mergers and acquisitions); Cindy A. Schipani, Environmental Law and Business In The 21st Century: Infiltration of Enterprise Theory Into Environmental Jurisprudence, 22 IOWA J. CORP. L. 599 (1997) (discussing piercing the corporate veil to impose liability upon the parent corporation which dominates its subsidiaries); Karin Schwindt, Limited Liability Companies: Issues in Member Liability, 44 UCLA L. REV. 1541 (1997) (discussing the scope of member liability in connection with limited liability companies); Thompson, supra note 20, 1036, 1048 (indicating that in a sample of 1583 cases, there were decisions to pierce in 636 cases or 40.18%); Robert B. Thompson, The Limits of Liability In The New Limited Liability Entities, 32 WAKE FOREST L. REV. 1, at 6, n.32 (1997) (indicating that plaintiffs are veil piercing in the context of new business entities such as limited liability companies); Romney v. Lin: ERISA Preemption of 630 of New York's Business Corporation Law, 71 ST. JOHN'S L. REV. 691(1997) (discussing personal liability under ERISA).
50. Jeffrey M. Colon, Changing U.S. Tax Jurisdiction: Expatriates, Immigrants, and The Need For A Coherent Tax Policy, 34 SAN DIEGO L. REV. 1 (1997) (including a discussion of piercing the corporate veil of a foreign corporation where corporate formalities have not been observed); Brian A. Comer, The Bi-Annual Bankruptcy Symposium: Ethics Issues: Student Works: Piercing The Corporate Veil in Wilson v. Friedberg, 48 S.C. L. REV. 905 (1997); Mark E. McKane, Operator Liability For Parent Corporations Under CERCLA: A Return To Basics, 91 Nw. U. L. REV. 1642 (1997) (discussing piercing the corporate veil among affiliated corporations); Derek Mohr, On The Application of CERCLA To Noncorporate Entities: An Analysis of the Redwing Decisions, 47 CASE W. RES. L. REV. 1157 (1997) (discussing the imposition of liability upon the partners in a limited partnership under CERCLA); William Hoffman Pincus, Piercing The Corporate Veil In Maritime Cases, 28 J. MAR. L. & COM. 341 (1997); John Salma, Professional Athletes Taxed To Death? Even They Can Strike Out!!!, 4 SPORTS L.J. 255 (1997) (discussing the prospect of piercing the corporate veil of corporations formed by athletes); Howard L. Schecter, Mergers and Acquisitions Symposium: Selected Risk Issues in Merger and Acquisition Transactions, 51 U. MIAMI L. REV. 719 (1997) (discussing risks relating to liabilities in connection with mergers and acquisitions); Cindy A. Schipani, Environmental Law and Business In The 21st Century: Infiltration of Enterprise Theory Into Environmental Jurisprudence, 22 IOWA J. CORP. L. 599 (1997) (discussing piercing the corporate veil to impose liability upon the parent corporation which dominates its subsidiaries); Karin Schwindt, Limited Liability Companies: Issues in Member Liability, 44 UCLA L. REV. 1541 (1997) (discussing the scope of member liability in connection with limited liability companies); Thompson, supra note 20, 1036, 1048 (indicating that in a sample of 1583 cases, there were decisions to pierce in 636 cases or 40.18%); Robert B. Thompson, The Limits of Liability In The New Limited Liability Entities, 32 WAKE FOREST L. REV. 1, at 6, n.32 (1997) (indicating that plaintiffs are veil piercing in the context of new business entities such as limited liability companies); Romney v. Lin: ERISA Preemption of 630 of New York's Business Corporation Law, 71 ST. JOHN'S L. REV. 691(1997) (discussing personal liability under ERISA).
51. See Creasy v. Breachwood Motors, Ltd., [1993] BCLC 480, [1992] BCC 638 (Q.B.) (involving the creation of a new corporation to avoid the claim of a former employee for wrongful dismissal. The plaintiff argued that the corporate form could not be used for the Purposes of fraud or as a device to evade a contractual or other legal obligation. The court indicated that in all the circumstances, the case was one in which the court would be justified in lifting the veil). See infra notes 170-219 and accompanying text.
52. See Security Exchange Ltd. v. Gordon, Transcript of Hearing, Oct. 7, 1988 (C.A.) (all "Transcript of Hearing" cites are from unrecorded cases which can be retrieved on Lexis through a name search) ("The question is whether Securities Exchange and Newco were really the alter ego, or puppets, of Gresham in the sense that they were a mere facade or mask for Gresham which concealed the true facts.")
53. See Wallersteiner v. Moir, 2 All E.R. 217, 1 W.L.R. 991 (C.A 1974) (involving allegations of fraud, misfeasance and breach of trust with regard to a shareholder who had gained control of a substantial public company. It was alleged that the defendant had used a number of legal entities as puppets and that the court should pull aside the corporate veil and treat the defendant as his creatures. The court agreed with the plaintiff and pierced the veil with respect to several legal entities, and imposed responsibility for their conduct upon the defendant).
54. See Wates Building Group Ltd. v. Jones, Transcript of Hearing, Feb. 5, 1996 (C.A.) (observing: "As to the doctrine of piercing the corporate veil, on which much argument was addressed to us, it must be borne in mind that this is a doctrine of very limited application in very special circumstances"). See Adams v. Cape Indus., 2 W.L.R. 657 (CA 1990) (determining not to enforce a default judgment by a Texas Court against an English parent company. In reaching its decision the court observed that if a company chooses to arrange the affairs of its group in such a way that the business carried on in a particular foreign country is the business of its subsidiary and not its own, it is entitled to do so, and it is not open to the court to disregard the separate corporate entity merely because it is just to do so). See Galmerrow Securities Ltd. v. National Westminster Bank, Transcript of Hearing, December 20, 1993 (Ch.) (indicating that in some special cases the Court may look through the company and see its wholly controlling shareholder but that the cases in which the Court has done so are rare). See Woolfson v. Strathclyde Reg'l Council, [1978] SC 90, [1978] SLT 159 (H.L.) (refusing to pierce the corporate veil between a corporation and an individual shareholder for purposes of determining entitlement to an award for damages for the disturbance of the use of property). But see Littlewoods Mail Order Stores, Ltd. v. I.R.C., 1 W.L.R. 1241 (C.A1969) (involving piercing the corporate veil between a parent and subsidiary in order to deny a tax deduction which was taken in connection with the acquisition of property. The Court interpreted its authority to pierce broadly).
55. See Jones v. Lipman, 1 W.L.R. 832 (Ch. 1962) (involving an attempt to avoid selling property pursuant to a valid contract. The defendant transferred the property to a corporation to avoid the transfer, however the court issued a decree of specific performance against both the shareholder and the corporate entity which held title); Merchandise Transp., Ltd. v. British Transp. Comm'n, [1962] 2 Q.B. 173 (C.A.) (involving the issuance of a special public carrier's license in which the licensing authority regarded a parent and subsidiary as one group for purposes of determining the entitlement to a license); Wallerstein v. Moir, 2 All E.R. 217 (1974), 1 W.L.R. 991 (C.A. 1974); Creasy v. Breachwood Motors, Ltd. [1993] BCLC 480, [1992] BCC 638 (Q.B. 1993); Re A Company Ltd. v. Vwagh [1985] BCLC 333, [1983-5] BCC 99, 421 (CA. 1985) (upholding an order for extensive interrogatories and an injunction restraining the defendant from disposing of shares in foreign companies entitled to English assets. The court noted that evidence established that after a fraud was committed, the defendant created a sophisticated and intricate network of English and foreign companies to dispose of his English assets). In some cases the corporate veil has been pierced in the absence of the commission of a fraud; DHN Food Distrib. Ltd. v. London Borough of Tower Hamlets, 3 All E.R. 462, 1 W.L.R. 852 (C.A. 1976) (the court pierced the corporate veil between a parent and subsidiary company for purposes of awarding compensation for a claim for disturbance in the ownership of property when the property was compulsorily purchased. The subsidiary held
56. The Aktiengesellschaft [hereinafter AG] is governed by the Stock Corporation Act or Aktiengesetz [hereinafter AktG], translated in 1 BUSINESS TRANSACTIONS IN GERMANY (Matthew Bender) app. 7 (Dennis Campbell et al. eds., 1994) (hereinafter BUSINESS TRANSACTIONS). See infra notes 96-169 and accompanying text (discussing veil-piercing under German law). In the case of the Stock Corporation, specific statutory provisions under the Stock Corporation Act address the liability of a dominating enterprise upon a dominated enterprise. See AktG § 291 to § 336. In Germany, the Stock Corporation is comparable to a publicly-traded American corporation or the public English corporation. See Dr. Thomas Stohlmeier, German Limited Liability Company - Unlimited Liability of Parent Company?, 21 INT'L BUS. LAW. 135, 136 (March 1993) (indicating that the AG is comparable to the American or English publicly-owned company).
57. The Aktiengesellschaft [hereinafter AG] is governed by the Stock Corporation Act or Aktiengesetz [hereinafter AktG], translated in 1 BUSINESS TRANSACTIONS IN GERMANY (Matthew Bender) app. 7 (Dennis Campbell et al. eds., 1994) (hereinafter BUSINESS TRANSACTIONS). See infra notes 96-169 and accompanying text (discussing veil-piercing under German law). In the case of the Stock Corporation, specific statutory provisions under the Stock Corporation Act address the liability of a dominating enterprise upon a dominated enterprise. See AktG § 291 to § 336. In Germany, the Stock Corporation is comparable to a publicly-traded American corporation or the public English corporation. See Dr. Thomas Stohlmeier, German Limited Liability Company - Unlimited Liability of Parent Company?, 21 INT'L BUS. LAW. 135, 136 (March 1993) (indicating that the AG is comparable to the American or English publicly-owned company).
58. The privately-owned Gesellschaft mit beschrankter Haftung, or GmbH, is governed by its own statute on limited liability companies. See Gesetz betreffend die Gesellschaften mit beschrankter Haftung (Act on Limited Liability Companies) [hereinafter GmbH] v. 10.5 1994 (BGBI. I 2922), (F.R.G.), 1 BUSINESS TRANSACTIONS, supra note 42, at app. 6.
59. See infra notes 159-69 (discussing the German case law which has emerged involving veil-piercing in the context of the GmbH).
60. See infra notes 96-173 and accompanying text (discussing the Qualified De Facto Konzern).
61. Interestingly, as of the beginning of the nineteenth century, it was common for shareholders to be directly liable for corporate debts. Spawned by the industrial revolution and the growing desire of the shareholders of manufacturing companies to obtain limited liability, limited liability became the rule by the 1850's. See Phillip I. Blumberg, Limited Liability and Corporate Groups, 11 J. CORP. L. 591, 591-95 (1986) (providing a detailed review of the emergence of limited liability in the United States). A minority of states retained unlimited liability. Rhode Island adopted limited liability as late as 1847 and California enacted limited liability in 1931. Personal liability of shareholders of banks remained until the Depression of 1929; PHILLIP I. BLUMBERG, THE LAW OF CORPORATE GROUPS § 2.01, at 30 (3d ed. 1997) (providing a historical overview of modern corporate law); Anderson v. Abbott, 321 U.S. 349 (1944) (imposing personal liability on shareholders of a bank holding company under the banking law in effect prior to the Depression); E. MERRICK DODD, AMERICAN BUSINESS CORPORATIONS UNTIL 1860 (1954) (outlining the development of limited liability); Liggett v. Lee, 288 U.S. 517, 557-60 (1932) (tracing the evolution of the corporation dating from the early days when the corporation was a creature of state charter, in which Justice Brandeis explains that the public was slow to accept the corporate form, noting: Incorporation for business was commonly denied long after it had been freely granted for religious, educational and charitable purposes. It was denied because of fear. Fear of encroachment upon the liberties and opportunities of the individual. Fear of the subjection of labor to capital. Fear of monopoly. Fear that the absorption of capital by corporations, and their perpetual life, might bring evils similar to those which attended mortmain. Id. at 548). See also Michael J. Gaertner, Reverse Piercing The Corporate Veil: Should Corporation Owners Have It Both Ways?, 30 WM. & MARY L. REV. 667, 669-72 (indicating that in 1811 New York became the first state to enact a general incorporation law. General incorporation law became commonplace by about the middle of the nineteenth century).
62. Interestingly, as of the beginning of the nineteenth century, it was common for shareholders to be directly liable for corporate debts. Spawned by the industrial revolution and the growing desire of the shareholders of manufacturing companies to obtain limited liability, limited liability became the rule by the 1850's. See Phillip I. Blumberg, Limited Liability and Corporate Groups, 11 J. CORP. L. 591, 591-95 (1986) (providing a detailed review of the emergence of limited liability in the United States). A minority of states retained unlimited liability. Rhode Island adopted limited liability as late as 1847 and California enacted limited liability in 1931. Personal liability of shareholders of banks remained until the Depression of 1929; PHILLIP I. BLUMBERG, THE LAW OF CORPORATE GROUPS § 2.01, at 30 (3d ed. 1997) (providing a historical overview of modern corporate law); Anderson v. Abbott, 321 U.S. 349 (1944) (imposing personal liability on shareholders of a bank holding company under the banking law in effect prior to the Depression); E. MERRICK DODD, AMERICAN BUSINESS CORPORATIONS UNTIL 1860 (1954) (outlining the development of limited liability); Liggett v. Lee, 288 U.S. 517, 557-60 (1932) (tracing the evolution of the corporation dating from the early days when the corporation was a creature of state charter, in which Justice Brandeis explains that the public was slow to accept the corporate form, noting: Incorporation for business was commonly denied long after it had been freely granted for religious, educational and charitable purposes. It was denied because of fear. Fear of encroachment upon the liberties and opportunities of the individual. Fear of the subjection of labor to capital. Fear of monopoly. Fear that the absorption of capital by corporations, and their perpetual life, might bring evils similar to those which attended mortmain. Id. at 548). See also Michael J. Gaertner, Reverse Piercing The Corporate Veil: Should Corporation Owners Have It Both Ways?, 30 WM. & MARY L. REV. 667, 669-72 (indicating that in 1811 New York became the first state to enact a general incorporation law. General incorporation law became commonplace by about the middle of the nineteenth century).
63. Blumberg, Limited Liability and Corporate Groups, supra note 46, at 595 (1986) (indicating that there were isolated attempts to provide for unlimited shareholder liability but these came to an end by the 1850's).
64. Berle, supra note 12, at 344.
65. Blumberg, Limited Liability and Corporate Groups, supra note 46, at 605. Just as it has been said that the railways built the tort law, it may be said that the railways paved the way toward the emergence of corporate groups. Initially special charters for corporate ownership were obtained by the Baltimore & Ohio Railroad and the Pennsylvania Railroad. Id. at 595.
66. Blumberg, supra note 46, at 607 indicating: [T]he same rule (of limited liability) was applied unthinkingly and automatically to the parent corporation. Limited liability was accorded to the parent without realization that the relation of parent to subsidiary, where both comprised the enterprise, was markedly different from the relation of investor to the enterprise. New Jersey was the first state to permit one company to acquire stock in another in the late nineteenth century. See BLUMBEBG, THE LAW OF CORPORATE GROUPS, supra note 46, at 31-32 (indicating that New Jersey broke the barrier to inter corporate ownership in 1888 and limited liability was extended to the corporate shareholder); Jonathan M. Landers, A Unified Approach To Parent, Subsidiary, and Affiliate Questions in Bankruptcy, U. CHI. L. REV. 589, 619 (1975) (observing that the historical background indicates that limited liability was never really intended to protect a parent corporation from the liability of the subsidiary. Landers ventures that if limited liability were being considered for the first time, a strong argument could be made that it should not be extended to the corporate parent vis-a-vis its subsidiary).
67. Blumberg, supra note 46, at 607 indicating: [T]he same rule (of limited liability) was applied unthinkingly and automatically to the parent corporation. Limited liability was accorded to the parent without realization that the relation of parent to subsidiary, where both comprised the enterprise, was markedly different from the relation of investor to the enterprise. New Jersey was the first state to permit one company to acquire stock in another in the late nineteenth century. See BLUMBEBG, THE LAW OF CORPORATE GROUPS, supra note 46, at 31-32 (indicating that New Jersey broke the barrier to inter corporate ownership in 1888 and limited liability was extended to the corporate shareholder); Jonathan M. Landers, A Unified Approach To Parent, Subsidiary, and Affiliate Questions in Bankruptcy, U. CHI. L. REV. 589, 619 (1975) (observing that the historical background indicates that limited liability was never really intended to protect a parent corporation from the liability of the subsidiary. Landers ventures that if limited liability were being considered for the first time, a strong argument could be made that it should not be extended to the corporate parent vis-a-vis its subsidiary).
68. See Eisenberg, supra note 24, at 1577-84 (indicating that many sectors of economic life from commercial banking to unregulated commercial enterprises are conducted through affiliated companies). See William O. Douglas & Carrol M. Shanks, Insulation From Liability Through Subsidiary Corporations, 39 YALE L.J. 193 (1929) (noting as early as 1929 that the affiliated business structure is used for a wide range of business reasons including: the avoidance of complications in the purchase of physical assets; the preservation of good will of an established business; the minimization of taxation; and the furtherance of management goals).
69. See Eisenberg, supra note 24, at 1577-84 (indicating that many sectors of economic life from commercial banking to unregulated commercial enterprises are conducted through affiliated companies). See William O. Douglas & Carrol M. Shanks, Insulation From Liability Through Subsidiary Corporations, 39 YALE L.J. 193 (1929) (noting as early as 1929 that the affiliated business structure is used for a wide range of business reasons including: the avoidance of complications in the purchase of physical assets; the preservation of good will of an established business; the minimization of taxation; and the furtherance of management goals).
70. See Thompson, supra note 20. Veil-piercing litigation occurs in a wide variety of contexts in today's business environment. See Robert B. Thompson, The Limits of Liability In The New Limited Liability Entities, 32 WAKE FOREST L. REV. 1 (1997) (discussing veil-piercing in connection with limited liability companies and limited liability partnerships).
71. See Thompson, supra note 20. Veil-piercing litigation occurs in a wide variety of contexts in today's business environment. See Robert B. Thompson, The Limits of Liability In The New Limited Liability Entities, 32 WAKE FOREST L. REV. 1 (1997) (discussing veil-piercing in connection with limited liability companies and limited liability partnerships).
72. See Thompson, supra note 20 (indicating that the initial pool of cases found in a Westlaw analysis revealed 2,000 cases involving veil-piercing terminology. The pool of veil-piercing cases which were eventually analyzed consisted of 1600 cases. In contrast, fewer than 300 cases were found on "corporate takeovers" or "hostile takeovers").
73. ALA. CODE § 10-12-1 to 61 (1996); ALASKA STAT § 10.50.010 to .995 (Michie Supp. 1996); ARIZ. REV. STAT. ANN.§§ 29-601 to 857 (West 1996); ARK. CODE ANN.§ 4-32-10 to -1316 (Michie Supp. 1996); CALIF. CORP. CODE § 17000 to 17705 (West 1997); COLO. REV. STAT. ANN. §§7-80-101 to 1101 (West 1996); CONN. GEN. STAT. ANN. § 34-100 to 242 (West Supp. 1997) ; DEL. CODE ANN. tit. 18, §§ 101 to 1107 (West Supp. 1996); D.C. CODE ANN. § 29-1301 to 1375 (1996); FLA. STAT. ANN. §§ 608.401 to .514 (West Supp. 1997); GA. CODE ANN. §§ 14-11-100 to 14-11-1109 (Michie 1997) ; HAW. H.B. 2787 intro. 1-22-96; IDAHO CODE § 53-601 to 672 (Michie Supp. 1997); ILL. ANN. STAT. ch. 805, par. 180/1 to 180/60-1 (Smith-Hurd Supp. 1997); IND. CODE ANN. § 23-18-1 to 23-18-19 (Burns 1996); IOWA CODE ANN., § 490A.100 to .1601 (West Supp. 1997); KAN. STAT. ANN. §§ 17-7601 to 7652 (1995); KY. REV. STAT. ANN. § 275.001 to .455 (Michie Supp. 1996); LA. REV. STAT. ANN. §§ 12-1301 to 1369 (West Supp. 1997); ME. REV. STAT. ANN. tit. 31 § 601-762 (West Supp. 1996); MD. CODE ANN., CORPS. & ASS'NS Secs 4A-101 to 4A-1103 (Supp. 1996); MASS. ANN. LAWS ch.156C, § 1 (1997); MICH. COMP. LAWS ANN. § 450.4101 to 450.5200 (West Supp. 1997); MINN. STAT. ANN. § 322.B.01 to .960 (West Supp. 1997); MISS. CODE ANN. 79-6-1 to 79-6-39 (1996); MO. REV. STAT. § 347.010 to 347.740 (Vernon Supp. 1997); MONT. CODE ANN. 35-8-101 to 35-8-1307 (1995); NEB. REV. STAT. § 21-2601 to -2653)(Supp. 1996) ; NEV. REV. STAT. ANN. § 86.010 to .571 (Michie 1994); N.H. REV. STAT. ANN. § 304C:1 to 3040:85 (1996); N.J. STAT. ANN § 42:2B-1 to-70 (West Supp. 1997); N.M. STAT. ANN. § 53-19-1 to -74 (Michie 1996); N.Y. LTD. LIAB. LAW. § 101-1403 (McKinney 1997 Pamphlet); N.C. GEN. STAT. § 57C-1-01 to 57C-10-07 (Michie 1993); N.D. CENT. CODE § 10-32-01 to -155 (Michie 1997); OHIO REV. CODE ANN. § 1705.01 to .58 (Anderson Supp. 1997); OKLA. STAT. ANN. Tit. 18, § 2000 to 2060 (West Supp. 1997); OR. REV. STAT .63.001 to.990 (1995) ; 15 PA. CONS. STAT. ANN.§ 8901 to 8998 (1995); R.I. GEN. LAWS § 7-16-1 to-75 (1995); S.C. CODE ANN. §33-43-101 to -1409 (Law Co-op Supp. 1996); S.D. CODIFIED LAWS ANN. § 47-34-1 to 47-34-59 (Supp. 1997); TENN. CODE ANN. § 48-201-101 to -248-606 (1995); TEX. REV. CIV. STAT. ANN. Art. 1528n (West 1997); UTAH CODE ANN. §§ 48-2a-207 to 48-2b-158 (Supp. 1996); VA. CODE ANN. § 13.1-1000 to -1073 (Michie 1997); VT. H.B. 346 & S.B. 98 (authorizing limited liability companies); VA. CODE ANN. § 13.1-1000 to 13.1-1073 (Michie 1996); WASH. REV. CODE ANN. § 25.15.005 to .902 (West Supp. 1997); W. VA. CODE §§ 31-1A-1 to 31-1A-69 (Michie 1996); WIS. STAT. § 183.0102 to 183.1305 (West 1996); WYO. STAT. §§ 17-15-101 to 136 (West Supp. 1996). See Steven C. Bahls, Application of Corporate Law Doctrines To Limited Liability Companies, 55 MONT. L. REV. 43, 60-66 (1994) (anticipating that the corporate veil-piercing analysis will be applied to the LLC); Eric Fox, Note, Piercing The Corporate Veil of Limited Liability Companies, 62 GEO. WASH. L. REV. 1143, 1174 (1994) (indicating that failure to follow formalities and failure to treat the LLC as a separate entity should not be grounds for piercing the corporate veil of the LLC because of the informal nature of the LLC entity);
74. ALA. CODE § 10-12-1 to 61 (1996); ALASKA STAT § 10.50.010 to .995 (Michie Supp. 1996); ARIZ. REV. STAT. ANN.§§ 29-601 to 857 (West 1996); ARK. CODE ANN.§ 4-32-10 to -1316 (Michie Supp. 1996); CALIF. CORP. CODE § 17000 to 17705 (West 1997); COLO. REV. STAT. ANN. §§7-80-101 to 1101 (West 1996); CONN. GEN. STAT. ANN. § 34-100 to 242 (West Supp. 1997) ; DEL. CODE ANN. tit. 18, §§ 101 to 1107 (West Supp. 1996); D.C. CODE ANN. § 29-1301 to 1375 (1996); FLA. STAT. ANN. §§ 608.401 to .514 (West Supp. 1997); GA. CODE ANN. §§ 14-11-100 to 14-11-1109 (Michie 1997) ; HAW. H.B. 2787 intro. 1-22-96; IDAHO CODE § 53-601 to 672 (Michie Supp. 1997); ILL. ANN. STAT. ch. 805, par. 180/1 to 180/60-1 (Smith-Hurd Supp. 1997); IND. CODE ANN. § 23-18-1 to 23-18-19 (Burns 1996); IOWA CODE ANN., § 490A.100 to .1601 (West Supp. 1997); KAN. STAT. ANN. §§ 17-7601 to 7652 (1995); KY. REV. STAT. ANN. § 275.001 to .455 (Michie Supp. 1996); LA. REV. STAT. ANN. §§ 12-1301 to 1369 (West Supp. 1997); ME. REV. STAT. ANN. tit. 31 § 601-762 (West Supp. 1996); MD. CODE ANN., CORPS. & ASS'NS Secs 4A-101 to 4A-1103 (Supp. 1996); MASS. ANN. LAWS ch.156C, § 1 (1997); MICH. COMP. LAWS ANN. § 450.4101 to 450.5200 (West Supp. 1997); MINN. STAT. ANN. § 322.B.01 to .960 (West Supp. 1997); MISS. CODE ANN. 79-6-1 to 79-6-39 (1996); MO. REV. STAT. § 347.010 to 347.740 (Vernon Supp. 1997); MONT. CODE ANN. 35-8-101 to 35-8-1307 (1995); NEB. REV. STAT. § 21-2601 to - 2653)(Supp. 1996) ; NEV. REV. STAT. ANN. § 86.010 to .571 (Michie 1994); N.H. REV. STAT. ANN. § 304C:1 to 3040:85 (1996); N.J. STAT. ANN § 42:2B-1 to-70 (West Supp. 1997); N.M. STAT. ANN. § 53-19-1 to -74 (Michie 1996); N.Y. LTD. LIAB. LAW. § 101-1403 (McKinney 1997 Pamphlet); N.C. GEN. STAT. § 57C-1-01 to 57C-10-07 (Michie 1993); N.D. CENT. CODE § 10-32-01 to -155 (Michie 1997); OHIO REV. CODE ANN. § 1705.01 to .58 (Anderson Supp. 1997); OKLA. STAT. ANN. Tit. 18, § 2000 to 2060 (West Supp. 1997); OR. REV. STAT .63.001 to.990 (1995) ; 15 PA. CONS. STAT. ANN.§ 8901 to 8998 (1995); R.I. GEN. LAWS § 7-16-1 to-75 (1995); S.C. CODE ANN. §33-43-101 to -1409 (Law Co-op Supp. 1996); S.D. CODIFIED LAWS ANN. § 47-34-1 to 47-34-59 (Supp. 1997); TENN. CODE ANN. § 48-201-101 to -248-606 (1995); TEX. REV. CIV. STAT. ANN. Art. 1528n (West 1997); UTAH CODE ANN. §§ 48-2a-207 to 48-2b-158 (Supp. 1996); VA. CODE ANN. § 13.1-1000 to -1073 (Michie 1997); VT. H.B. 346 & S.B. 98 (authorizing limited liability companies); VA. CODE ANN. § 13.1-1000 to 13.1-1073 (Michie 1996); WASH. REV. CODE ANN. § 25.15.005 to .902 (West Supp. 1997); W. VA. CODE §§ 31-1A-1 to 31-1A-69 (Michie 1996); WIS. STAT. § 183.0102 to 183.1305 (West 1996); WYO. STAT. §§ 17-15-101 to 136 (West Supp. 1996). See Steven C. Bahls, Application of Corporate Law Doctrines To Limited Liability Companies, 55 MONT. L. REV. 43, 60-66 (1994) (anticipating that the corporate veil-piercing analysis will be applied to the LLC); Eric Fox, Note, Piercing The Corporate Veil of Limited Liability Companies, 62 GEO. WASH. L. REV. 1143, 1174 (1994) (indicating that failure to follow formalities and failure to treat the LLC as a separate entity should not be grounds for piercing the corporate veil of the LLC because of the informal nature of the LLC entity);
75. ALA. CODE § 10-12-1 to 61 (1996); ALASKA STAT § 10.50.010 to .995 (Michie Supp. 1996); ARIZ. REV. STAT. ANN.§§ 29-601 to 857 (West 1996); ARK. CODE ANN.§ 4-32-10 to -1316 (Michie Supp. 1996); CALIF. CORP. CODE § 17000 to 17705 (West 1997); COLO. REV. STAT. ANN. §§7-80-101 to 1101 (West 1996); CONN. GEN. STAT. ANN. § 34-100 to 242 (West Supp. 1997) ; DEL. CODE ANN. tit. 18, §§ 101 to 1107 (West Supp. 1996); D.C. CODE ANN. § 29-1301 to 1375 (1996); FLA. STAT. ANN. §§ 608.401 to .514 (West Supp. 1997); GA. CODE ANN. §§ 14-11-100 to 14-11-1109 (Michie 1997) ; HAW. H.B. 2787 intro. 1-22-96; IDAHO CODE § 53-601 to 672 (Michie Supp. 1997); ILL. ANN. STAT. ch. 805, par. 180/1 to 180/60-1 (Smith-Hurd Supp. 1997); IND. CODE ANN. § 23-18-1 to 23-18-19 (Burns 1996); IOWA CODE ANN., § 490A.100 to .1601 (West Supp. 1997); KAN. STAT. ANN. §§ 17-7601 to 7652 (1995); KY. REV. STAT. ANN. § 275.001 to .455 (Michie Supp. 1996); LA. REV. STAT. ANN. §§ 12-1301 to 1369 (West Supp. 1997); ME. REV. STAT. ANN. tit. 31 § 601-762 (West Supp. 1996); MD. CODE ANN., CORPS. & ASS'NS Secs 4A-101 to 4A-1103 (Supp. 1996); MASS. ANN. LAWS ch.156C, § 1 (1997); MICH. COMP. LAWS ANN. § 450.4101 to 450.5200 (West Supp. 1997); MINN. STAT. ANN. § 322.B.01 to .960 (West Supp. 1997); MISS. CODE ANN. 79-6-1 to 79-6-39 (1996); MO. REV. STAT. § 347.010 to 347.740 (Vernon Supp. 1997); MONT. CODE ANN. 35-8-101 to 35-8-1307 (1995); NEB. REV. STAT. § 21-2601 to - 2653)(Supp. 1996) ; NEV. REV. STAT. ANN. § 86.010 to .571 (Michie 1994); N.H. REV. STAT. ANN. § 304C:1 to 3040:85 (1996); N.J. STAT. ANN § 42:2B-1 to-70 (West Supp. 1997); N.M. STAT. ANN. § 53-19-1 to -74 (Michie 1996); N.Y. LTD. LIAB. LAW. § 101-1403 (McKinney 1997 Pamphlet); N.C. GEN. STAT. § 57C-1-01 to 57C-10-07 (Michie 1993); N.D. CENT. CODE § 10-32-01 to -155 (Michie 1997); OHIO REV. CODE ANN. § 1705.01 to .58 (Anderson Supp. 1997); OKLA. STAT. ANN. Tit. 18, § 2000 to 2060 (West Supp. 1997); OR. REV. STAT .63.001 to.990 (1995) ; 15 PA. CONS. STAT. ANN.§ 8901 to 8998 (1995); R.I. GEN. LAWS § 7-16-1 to-75 (1995); S.C. CODE ANN. §33-43-101 to -1409 (Law Co-op Supp. 1996); S.D. CODIFIED LAWS ANN. § 47-34-1 to 47-34-59 (Supp. 1997); TENN. CODE ANN. § 48-201-101 to -248-606 (1995); TEX. REV. CIV. STAT. ANN. Art. 1528n (West 1997); UTAH CODE ANN. §§ 48-2a-207 to 48-2b-158 (Supp. 1996); VA. CODE ANN. § 13.1-1000 to -1073 (Michie 1997); VT. H.B. 346 & S.B. 98 (authorizing limited liability companies); VA. CODE ANN. § 13.1-1000 to 13.1-1073 (Michie 1996); WASH. REV. CODE ANN. § 25.15.005 to .902 (West Supp. 1997); W. VA. CODE §§ 31-1A-1 to 31-1A-69 (Michie 1996); WIS. STAT. § 183.0102 to 183.1305 (West 1996); WYO. STAT. §§ 17-15-101 to 136 (West Supp. 1996). See Steven C. Bahls, Application of Corporate Law Doctrines To Limited Liability Companies, 55 MONT. L. REV. 43, 60-66 (1994) (anticipating that the corporate veil-piercing analysis will be applied to the LLC); Eric Fox, Note, Piercing The Corporate Veil of Limited Liability Companies, 62 GEO. WASH. L. REV. 1143, 1174 (1994) (indicating that failure to follow formalities and failure to treat the LLC as a separate entity should not be grounds for piercing the corporate veil of the LLC because of the informal nature of the LLC entity);
76. Harvey Gelb, Liabilities of Members and Managers of Wyoming Limited Liability Companies, 31 LAND & WATER L. REV. 133, 141 (1996) (indicating that it is not unreasonable to expect courts to apply the same types of consideration in piercing the veil of the limited liability company as applied in the case of the corporation. The author indicates that fraud and inadequate capitalization should constitute grounds for veil-piercing in the LLC context);
77. Thompson, supra note 52, at 1 (discussing limited liability as applied to noncorporate entities);
78. Dale A. Ostterle, Subcurrents in LLC Statutes: Limiting the Discretion of State Courts To Restructure The Internal Affairs of Small Business, 66 U. COLO. L. REV. 881 (1995) (discussing the potential for courts to impose personal liability upon LLC members);
79. Robert B. Thompson, The Taming of Limited Liability Companies, 66 U. COLO. L. REV. 921, 942 (1995) (indicating that the courts may impose liability upon members in the context of requiring members to exercise the duty to supervise).
80. Justice Cardozo has been frequently quoted as criticizing the veil piercing doctrine. See Berkey v. Third Ave. Ry., 155 N.E. 58, 61 (N.Y. 1927) indicating: The whole problem of the relation between parent and subsidiary corporations is one that is still enveloped in the mists of metaphor. Metaphors in law are to be narrowly watched, for starting as devices to liberate thought, they end often by enslaving it. We say at times that the corporate entity will be ignored when the parent corporation operates a business through a subsidiary which is characterized as an 'alias' or a 'dummy'. All this is well enough if the picturesqueness of the epithets does not lead us to forget that the essential term to be defined is the act of operation. Dominion may be so complete, interference so obtrusive, that by general rules of agency the parent will be a principal and the subsidiary an agent. Where control is less than this, we are remitted to the tests of honesty and justice.
81. See Ioviero v. Ciga Hotels, 475 N.Y.S.2d 880 (N.Y. App. Div. 1984) (involving a plaintiff who fell at a hotel in Venice and attempted to use the veil-piercing doctrine to hold a related New York sales and promotional company liable).
82. The widespread use of subsidiaries which conduct business in diverse countries contributes significantly to the complexity of contemporary corporate veil-piercing litigation. See Giuseppinna Note v. CIA Secula di Armanento, 310 F. Supp. 639 (S.D. N.Y.1970) (involving a personal injury suit resulting from the explosion of an oil tanker. The oil tanker was owned by an Italian Corporation and was leased to a British subsidiary of British Petroleum Company Ltd. The oil terminal and loading facilities were under exclusive operation and control of a Dutch subsidiary of a British corporation whose shares were held directly and indirectly by many of the world's major oil companies which are members of the Iranian Oil Consortium of 1954. The plaintiffs sought to pierce the corporate veil of the Dutch subsidiary, and successive layers of subsidiary entities to ultimately reach the parent companies which were major oil corporations. The suit was instituted in New York because it was the place where the oil consortium agreement was executed. The twenty-three defendants included domestic U.S. companies, foreign corporations of Britain, the Netherlands, France, Italy, Iran, and the government of Iran); Fish & Neave v. Perovetz, L.P.I., No. 91 Civ 7047 (CSH), 1992 U.S.Dist. LEXIS 20228, at *1 (S.D.N.Y., Jan. 7, 1993) (involving a lawsuit initiated by a New York law firm seeking to pierce the corporate veil of a network of affiliated U.K., Netherlands Antilles, and Delaware companies arising out of legal services rendered in connection with patent matter); Japan Petroleum Co. (Nigeria Ltd.) v. Ashland Oil Inc., 465 F. Supp. 831 (D. Del. 1978) (involving a suit by a Nigerian corporation against a Kentucky parent company which owned two Nigerian subsidiaries. The subsidiaries lost an oil drilling rig in violation of a leasing agreement); O'Berry v. McDermott, Inc. , 712 S.W.2d 206 (Tex. Ct. App. 1986) (involving the question of whether an employee who was injured on the job could sue the parent company in California even though he was employed by its subsidiary in Thailand where he was injured).
83. See In Re Union Carbide Corp. Gas Plant Disaster, 809 F.2d 195 (2d Cir. 1987); RICHARD SCHAFFER ET AL., INTERNATIONAL BUSINESS LAW AND ITS ENVIRONMENT 26 (3d ed. 1996) (discussing the Bhopal industrial disaster which occurred in a plant owned by Union Carbide Corporation India Limited which was 51% owned by Union Carbide, a U.S. corporation. The 2d Circuit upheld the District Court's dismissal of the case on the basis of the doctrine of forum non convenions. This doctrine states that where a case is properly heard in more than one court, it should be heard by the one that is most convenient. The case was eventually settled in India for $470 million. Interestingly, the plaintiffs argument was not premised on traditional concepts of respondeat superior. Instead, liability was premised on the single enterprise theory. The plaintiffs argued that Union Carbide is a multinational corporation with a global purpose, and as such, its parent and subsidiary companies should be treated as one unit); DAVID EPSTEIN & JEFFERY SNYDER, INTERNATIONAL LITIGATION §§ 6.01 to 6.09 (1996) (providing an excellent discussion of the jurisidictional issues which arise when jurisdiction in the U.S. is sought over a company incorporated outside of the U.S.); Daniel G. Brown, Jurisdiction Over A Corporation On The Basis Of The Contracts Of An Affiliated Corporation: Do You Have To Pierce The Corporate Veil, 61 U. CIN. L. REV. 595 (1992) (providing an overview of jurisidictional questions concerning affiliated groups under U.S. law).
84. See In Re Union Carbide Corp. Gas Plant Disaster, 809 F.2d 195 (2d Cir. 1987); RICHARD SCHAFFER ET AL., INTERNATIONAL BUSINESS LAW AND ITS ENVIRONMENT 26 (3d ed. 1996) (discussing the Bhopal industrial disaster which occurred in a plant owned by Union Carbide Corporation India Limited which was 51% owned by Union Carbide, a U.S. corporation. The 2d Circuit upheld the District Court's dismissal of the case on the basis of the doctrine of forum non convenions. This doctrine states that where a case is properly heard in more than one court, it should be heard by the one that is most convenient. The case was eventually settled in India for $470 million. Interestingly, the plaintiffs argument was not premised on traditional concepts of respondeat superior. Instead, liability was premised on the single enterprise theory. The plaintiffs argued that Union Carbide is a multinational corporation with a global purpose, and as such, its parent and subsidiary companies should be treated as one unit); DAVID EPSTEIN & JEFFERY SNYDER, INTERNATIONAL LITIGATION §§ 6.01 to 6.09 (1996) (providing an excellent discussion of the jurisidictional issues which arise when jurisdiction in the U.S. is sought over a company incorporated outside of the U.S.); Daniel G. Brown, Jurisdiction Over A Corporation On The Basis Of The Contracts Of An Affiliated Corporation: Do You Have To Pierce The Corporate Veil, 61 U. CIN. L. REV. 595 (1992) (providing an overview of jurisidictional questions concerning affiliated groups under U.S. law).
85. See Thompson, supra note 20, at 1057.
86. See United States v. Jon-T Chemicals, Inc., 768 F.2d 686, 691 (5th Cir. 1985) (indicating that control required amounts to total domination of the subservient corporation, to the extent that the subservient corporation manifests no separate interests of its own).
87. O'NEILL & THOMPSON, supra note 28, § 1.10 , at 47-48 nn. 3-5 (stressing that veil-piercing is an equitable doctrine applied to particular facts and that the occurrence of veil-piercing in one case does not mean that veil-piercing would occur in other situations, citing Service Iron Foundry, Inc. v. M.A. Bell Co., 588 P.2d 463, 473 (Kan. Ct. App. 1978) as providing: "While the power to pierce the corporate veil is to be exercised reluctantly and cautiously, the corporate entity can be disregarded if it is used to cloak or cover fraud or to work injustice, or if necessary to achieve equity").
88. See Thompson, supra note 20, at 1039 (indicating that the traditional reasons for piercing such as misrepresentation, lack of formalities, and undercapitalization appear to turn up much less frequently in tort settings).
89. O'NEAL & THOMPSON, supra note 28, at § 1.10 (providing an overview of the general principles employed by the courts).
90. O'NEAL & THOMPSON, supra note 28, at § 1.10.
91. See Berkey v. Third Ave. Ry., 155 N.E. 58, 61 (N.Y. 1927) (indicating that "Dominion may be so complete, interference so obtrusive, that by general rules of agency the parent will be a principal and the subsidiary an agent").
92. See Anderson v. Kenn, 433 A.2d 752 (Me.1981) (involving a suit by former employees to recover vacation, severance, and other wages in which the court indicated reluctance to pierce the corporate veil except in the case of fraud, illegality or "to justify a wrong"); Sears Roebuck & Co. v. Jardel, 421 F.2d 1048, 1052 (3d Cir. 1970) (involving a claim by a subsidiary corporation that a release executed between its parent company and a subcontractor was also binding upon the subsidiary. The court indicated that the corporate veil would be pierced only if the corporate entity is used to defeat public convenience, justify a wrong, protect fraud or defend crime).
93. Pauley Petroleum v. Continental Oil Co., 239 A.2d 629, 632 (Del. 1968) (involving a contractual dispute arising out of mineral exploration rights). See Francis O. Day Co. v. Shapiro, 267 F.2d 669, 672 (D.O. Cir. 1959) (indicating courts generally take the position that the corporate form is not to be employed to work injustice); Dir's Guild of Am. v. Garrison Prod., 773 F. Supp. 755, 759 (S.D.N.Y. 1990) (indicating that the court is guided by the general principle that liability is imposed when doing so would achieve an equitable result).
94. Amfac Foods, Inc. v. Int'l Systems & Controls Corp., 654 P.2d 1092, 1100 (Ore. 1982), rev'g 630 P.2d 868 (Ore. Ct. App. 1981) (indicating that the court requires some form of moral culpability on the part of the parent company before the parent will be held liable for the subsidiary's debts). 71 See BLUMBERG, THE LAW OF CORPORATE GROUPS, supra note 46, at § 2.02.
95. See R.W. HAMILTON, CORPORATIONS INCLUDING PARTNERSHIPS AND LIMITED PARTNERSHIPS 261(4th ed. 1990) (identifying twenty-five metaphors describing the prohibited manner in which the shareholder uses the corporation including as a "mere adjunct," "agent," "alter ego," "alter identity," "arm," "blind," "branch," "buffer," "cloak," "coat," "corporate double," "instrumentality," "mouthpiece," "name," "nominal identity," "phrase," "puppet," "screen," "sham," "simulacrum," "snare," "stooge," "subterfuge," or "tool").
96. Carte Blanche (Singapore) Pte. Ltd. v. Diners Club Int'l, 2 F.2d 24 (2d Cir. 1993) (involving a dispute over the marketing and servicing of credit cards in which a number of veil-piercing factors were considered, including the absence of corporate formalities; inadequate capitalization; withdrawal of corporate funds for personal purposes; overlap of officers, personnel, office space, and addresses and telephones; exercise of discretion in business decision-making; occurrence of non-arms length transactions; payment or guarantee of debts by other corporations in the group; and whether the dominated corporation had property used by other corporations in the group).
97. Dewitt v. W. Ray Flemming Fruit Co., 540 F.2d 681 (4th Cir. 1976).
98. United States v. Jon-T Chemicals, Inc., 768 F. 2d 686, 691-692 (5th Cir. 1985) (involving a civil action by the U.S. to recover damages from the erroneous payment of money pursuant to a federal agricultural subsidy program as the result of false information submitted by a corporate subsidiary of the defendant. The U.S. sought to hold the parent company liable. The court looked to whether the parent organized the subsidiary; the stock ownership of the parent; the use of common parent/subsidiary directors and officers; the use of common business departments; the preparation of joint financial statements and tax returns; the degree of parental financial assistance and the level of subsidiary capitalization; parental payment of subsidiary expenses; whether the subsidiary has business from sources other than from the parent; the observation of basic corporate formalities; and the degree to which the subsidiary conducts daily operations autonomously). See O'Berry v. McDermott, Inc., 712 S.W. 2d 206 (Tex. Ct. App. 1986) (involving the question of whether an employee of a Thai subsidiary could sue the U.S. parent company for damages resulting from an injury. In addition to the factors listed in Jon-T, factors indicative of whether the parent dominated the subsidiary included whether the parent maintained employee benefits for the subsidiary; whether the parent paid expenses or losses of the subsidiary; and whether there were informal intercorporate loans or book transactions between the companies); Am. Trading & Prod. Corp. v. Fischback & Moore, 311 F. Supp. 412 (N.D. Ill. 1970) (involving a suit for damages arising out of a fire); Mangan v. Terminal Transp. System, Inc., 86 N.Y.S. 666 (N.Y. Sup. Ct. 1936) (involving a tort action arising out of an injury sustained while the plaintiff was riding in a taxicab. The court pierced the corporate veil of four operating subsidiaries where the parent company gave the subsidiaries daily instructions, sold all the companies operating equipment, hired all employees, maintained books and records, provided legal services, and maintained a central repair facility).
99. See Amfac v. Int'l Systems & Controls Corp., 630 P.2d 868 (Ore. Ct. App. 1981) (involving a reversal by the Oregon Supreme Court in light of faulty instructions to the jury). Inadequate capital in relation to the magnitude of the enterprise has frequently been an important factor in the disregard of the corporate veil. See Anderson v. Abbott, 321 U.S. 349, 362 (1944) (expressing concern with capitalization); Francis O. Day Co. v. Shapiro, 267 F. 2d 669, 672 (D.C. Cir. 1959) (referring to inadequacy of capital as an issue of concern); Japan Petroleum Co. (Nigeria) v. Ashland Oil, 456 F. Supp. 831, 841 (D. Del. 1978) (involving a suit by a Nigerian corporation against a Kentucky company and its two Nigerian subsidiaries arising out of the destruction of an offshore drilling unit. The court failed to pierce a well-capitalized subsidiary's corporate veil in spite of the existence of several common management and administrative functions).
100. Civello Giuseppina Noto v. CIA Secula di Armento, 310 F. Supp. 639, 647 (S.D.N.Y. 1970) (involving a personal injury action instituted in New York on behalf oi crewmembers injured or killed when an Italian-owned oil tanker exploded at a loading dock in Iran).
101. See Nat'l Marine Serv. v. Thibodeaux & Co., 501 F.2d 940, 942 (5th Cir. 1974) (involving a suit by a shipyard to recover compensation for repairs, indicating that fraud is a concern but not a prerequisite). It has been observed, however, that veil-piercing typically involves fraud, or something approaching fraud, such as commingling of assets, or dealings which otherwise mislead; O'NEAL & THOMPSON, supra note 28, at § 1.10; Passalacqua Builders v. Resnick Developers South, Inc., 933 F.2d 131 (2d Cir. 1991) (involving piercing of a corporate veil to reach shareholders in a dispute involving the construction of a hotel. The Court indicated that the corporate veil could be pierced upon a showing of fraud or upon complete control by the dominating corporation which leads to a wrong against third parties).
102. See Castleberry v. Byron, 721 S.W.2d 273 (Tex. 1986) (involving the creation of a new corporate entity to avoid paying the buy-out price to a minority shareholder. The business of the old corporation was essentially transferred to the new entity. The court observed that one common sham is for a closely-held corporation to avoid an obligation by siphoning off corporate revenues, selling off assets, and transferring the old business to a new start-up entity. The Texas statute was subsequently narrowed to make actual fraud a prerequisite to piercing. See TEX. CIV. CODE ANN. Art. 2.21. (West 1997)).
103. See Francis O. Day Co. v. Shapiro, 267 F.2d 669, 672 (D.C. Cir. 1959) (reversing the dismissal of a case where the functions of a real estate enterprise were divided among over five companies with similar names); Berger v. Columbia Broadcasting, 453 F.2d 991 (5th Cir. 1972) (involving a suit against CBS for breach of a contract to air a fashion show executed by a subsidiary of CBS. When CBS, the parent company, executed a similar contract with another party, the court failed to pierce the corporate veil of the CBS subsidiary).
104. See Kissun v. Humana, Inc., 479 S.E.2d 751, 753 (Ga. 1997) (observing that even where parent and subsidiary have remained separate corporate entities both corporations may be liable where one corporation acts as the agent of another); Japan Petroleum Co. (Nigeria) v. Ashland Oil, 456 F. Supp. 831, 841(D. Del. 1978) involving contractual dispute in which the court emphasized that the fact that a parent holds out to the public that a subsidiary is a department of its own business increases the likelihood that the parent will be held liable for the subsidiary's acts).
105. See Weisser v. Mursam Shoe Corp., 127 F.2d 344, 348 (2d Cir. 1942) (involving a representation that an individual and his brother stood behind a lease agreement, in which the court noted " the doctrine hardly seems challenged that a representation that the liability of the subsidiary is the same as that of its parent or affiliate will result in Piercing of the corporate veil of a subsidiary which is in fact undercapitalized, dominated and used as an instrument of the parent"); Edwards Co. v. Monogram Indus., 730 F. 2d 977, 984 (5th Cir. 1984) (involving an unsuccessful attempt to pierce the corporate veil in a contract dispute wherein the court observed that the plaintiff had relied exclusively on the subsidiary's credit and there had been no assurance or representation that the parent would be responsible for the subsidiary's obligations).
106. See Ioviero v. Ciga Hotels, 475 N.Y.S.2d 880 (N.Y. Sup. Ct. 1984) (involving an infant who injured her hand when she slipped and fell while leaving the dining room at the Hotel Excelsior in Venice, Italy. The plaintiff sought to hold Ciga Hotels, a New York company, vicariously liable for the personal injuries sustained at the Venice hotel. The defendant successfully argued that Cigahotels, Inc. did not own, operate, manage or control the Venice hotel, but merely provided sales and promotional services to the hotel industry. The defendant emphasized that it had a contract which indicated that it was a separate company from Cigahotels, S.P.A., the Venice company. Although the defendant used the letterhead Cigahotels, S.P.A., as well as its trademark, the defendant's agency role was always disclosed at the bottom of each letter).
107. See Thompson, supra note 20, at 1058 (indicating that in his empirical study which analyzed 1567 veil-piercing cases, approximately 64% arose in the context of contract or tort controversies).
108. Phillip I. Blumberg, The Increasing Recognition of Enterprise Principles Determining Parent and Subsidiary Corporation Liabilities, 28 CONN. L. REV. 295 (1996) (providing an overview of federal and state laws which expressly apply to corporate groups of affiliated business entities).
109. Id. at 304 (tracing the development of federal and state laws which expressly apply to corporate groups of affiliated business entities).
110. Id.
111. Id. 89 Id. (indicating that the Bank Holding Company Act of 1956 has long served as a model for regulating holding company systems and provides that 25 percent ownership or control of voting shares gives rise to a rebuttable presumption of control).
112. Id. (citing Model Insurance Holding Company System Regulatory Act (1969), National Association of Insurance Commissioners, Model Reg. Serv. 440-1 et seq. (1992) as applied to holding companies).
113. Id.
114. Id.
115. Id. (citing I.R.C. §§ 245, 367, 482, 861, 862(b), 863, 864, 902, 951-64, 6038, 6038A). The Internal Revenue Code contains a great number of provisions which deal with related parties or affiliated groups. Nontaxable reorganization provisions under IRC § 368 employ "attribution rules" which treat a taxpayer as owning both stock directly held and indirectly held through related individuals or related business entities under IRC § 381 (West 1997). Related corporations may file a single consolidated return if they meet the definition of an "affiliated group" in IRC§1504 consisting of a corporate holding company structure in which one corporation owns 80 percent voting control and 80 percent of the value of the stock of another corporation.
116. Id. at 315 (discussing the unitary tax concept. Under the unitary tax, the tax liability is first computed for a combined return of affiliated corporations. Thereafter, an apportionment fraction is computed which reflects the ratio of in-state business to out-of-state business conducted by the group).
117. Id. at 323 (discussing the application of various environmental statutes applying to the "owner" or "operator" rather than to the single corporate entity). See Lynda J. Oswald & Cindy A. Schipani, CERCLA And The Erosion Of Traditional Corporate Law Doctrine, 86 Nw. U. L. REV. 259 (1992 ) (discussing parental liability for environmental torts).
118. See infra notes 249-70 and accompanying text (discussing the rules governing financial disclosures and minimum capital requirements).
119. See infra notes 249-70 and accompany text (discussing the rules governing financial disclosures and minimum capital requirements).
120. Under German law, managers and directors must apply the care of the orderly and prudent business manager, and negligence, however slight, might give rise to damages. See Breskovski, supra note 7, at 88-89 (providing an overview of the standards of care for directors in Germany).
121. Breskovski, supra note 7, at 88-89.
122. Breskovski, supra note 7, at 87-89 (providing that the U.K. manager may be liable for dishonesty, failure to detect or prevent fraudulent behavior, or for certain careless business decisions. However, judges have discretion to relieve negligent directors from liability where they have acted honestly and reasonably in the circumstances). Under the U.S. standard of care, the director must discharge his or her duties in good faith, with the care of an ordinarily prudent person in a like position, in a manner reasonably believed to be in the best interests of the corporation. See MODEL Bus. CORP. ACT. ANN. § 8.30 (1997). However, the business judgment rule protects directors from liability for informed business decisions which ultimately turn out to be erroneous. See Duty of Care and The Business Judgment Rule, Introductory Note, § 4.01, PRINCIPLES OF CORPORATE GOVERNANCE: ANALYSIS AND RECOMMENDATIONS (A.L.I., 1992).
123. The Civil Law system is derived from Roman law (after the Roman pattern ius civile) and like all European continental law rests on codified statutory law. As in other Civil Law systems, technically case law in Germany is not legally binding. The major legal codes of the Federal Republic of Germany consist of the Civil Code (Buergerliches Gesetzbuch/BGB), the Commercial Code (Handelsgesetzbuch/HGB) and the Criminal Code (Strafgesetzbuch/StGB). A variety of additional specialized statutes also exist and German case law appears to have an important role. For an excellent description of the German legal system, see 1 BUSINESS TRANSACTIONS, supra note 42, § 4.03 at 4-27 (Aug. 1993) and § 4.06 at 4-50 (Aug. 1993).
124. See 1 BUSINESS TRANACTIONS, supra note 42, § 4.03 at 4-24 (Aug. 1993).
125. The publicly-owned German corporation, the Aktiengesellschaft or AG is governed by the Stock Corporation Act, the Aktiengesetz or AktG. See 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7. For a thorough discussion of the public German corporation see Hwa-Jin Kim, Markets, Financial Institutions, and Corporate Governance: Perspectives From Germany, 26 LAW & POL'Y INT'L BUS. 371 (1995) (providing thorough discussion of the German corporation with particular emphasis on the impact which banks have on corporate governance in Germany).
126. The publicly-owned German corporation, the Aktiengesellschaft or AG is governed by the Stock Corporation Act, the Aktiengesetz or AktG. See 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7. For a thorough discussion of the public German corporation see Hwa-Jin Kim, Markets, Financial Institutions, and Corporate Governance: Perspectives From Germany, 26 LAW & POL'Y INT'L BUS. 371 (1995) (providing thorough discussion of the German corporation with particular emphasis on the impact which banks have on corporate governance in Germany).
127. The incorporation of the AG requires a minimum capital of DM 100,000. See Stohlmeier, supra note 42, at 136 (describing German corporate structure generally and focusing specifically on the liability of a parent company for the debts of a subsidiary).
128. Stohlmeier, supra note 42, at 136.
129. Stohlmeier, supra note 42, at 136. In the United States, a total of 56,000 corporations are included in Standard & Poor's Register of Corporations. See 1 STANDARD & POOR'S REGISTER OF CORPORATIONS, DIRECTORS AND EXECUTIVES (1997) (Introductory material indicates that over 56,000 corporations are listed. It is not clear, however, how many of these are U.S. publicly-owned corporations. In addition, the introductory materials indicate that some Canadian businesses and international corporations are also registered. A total of 160,000 U.S. corporations are listed in the 1997 Dun & Bradstreet Directory). See D & B MILLION DOLLAR DIRECTORY VIII (1997). A total of 3,965,000 corporations (public and private) filed corporate tax returns in the U.S. in 1993. See STATISTICAL ABSTRACT OF THE UNITED STATES, THE NATIONAL DATA BOOK 533 (1996).
130. The existence of the Supervisory Board, which is a separate board that oversees the direction of the company, is attractive in Germany especially in light of the fact that many German banks hold equity interests and seek additional protection for their investments. The existence of the Supervisory Board is typical of the two-tiered system of governance. See Breskovski, supra note 7, at 81-82 (indicating that a number of Eastern European countries have followed the German legal system which provides for both a Supervisory Board and a Board of Directors, offering a system which provides additional supervision
131. Breskovski, supra note 7, at 81-82, 85. The Draft Fifth Directive which proposes a corporate model for the European Community offers the choice of employing either a one-tiered or two-tiered system of governance.
132. Breskovski, supra note 7, at 85.
133. See Robert E. Benfield, Curing American Myopia: Can The German System of Corporate Governance Help?, 17 LOY. L.A.INT'L & COMP. L.J. 615 (1995) (analyzing the German system with particular emphasis on the public company and containing an excellent discussion of German corporate management).
134. Id. (indicating that approximately 500,000 GmbH's are registered throughout Germany).
135. See Henry P. De Vires & Friedrich K. Juenger, Limited Liability Contract: The GmbH, 64 COLUM. L. REV. 867 (1964) (including an excellent overview of the GmbH law).
136. See 2 BUSINESS TRANSACTIONS, supra note 42, § 23.02 at 23-26 (Nov. 1983) (providing that the company shall have one or more managing directors). See also GmbH § 52 ¶ 1, translated in BUSINESS TRANSACTIONS , supra note 42, at app. 6 (providing for specific contingencies in the event that a Supervisory Board is appointed pursuant to the articles of association). It should be noted that there are some circumstances in which the appointment of a Supervisory Board is mandatory. If certain Co-Determination Acts Apply, then a Supervisory Board is required. The Co-Determination Acts require that there be employee participation at the Supervisory Board level. Four Co-Determination Acts mandate employee participation in a Supervisory Board, including the Coal and Steel Co-Determination Act of May 21, 1951 (applicable to mining, coal and steel industries); The Supplementary Coal and Steel Co-Determination Act of August 7, 1956 (applicable to certain holding companies in the mining coal and steel industries); The Co-Determination Act of May 4, 1976 (applicable to certain legal structures which employ more than 2,000 employees); and The Shop Constitution Act 1952 of October 11, 1952 (applicable to enterprises with certain legal structures, including the GmbH, that employ more than 500 individuals and which creates a so-called "one-third" co-determination . See 2 BUSINESS TRANSACTIONS, supra note 42, at § 23.05.
137. 2 BUSINESS TRANSACTIONS, supra note 42, at § 23.05.
138. 2 BUSINESS TRANSACTIONS, supra note 42, at § 23.05.
139. See GmbH § 5(1), translated in BUSINESS TRANSACTIONS, supra note 42, at app. 6.
140. Previously, in order to obtain taxation as a partnership, IRS regulations required the LLC to avoid possessing more corporate than non corporate characteristics. See I.R.C. § 7701(West 1997). The four corporate characteristics are outlined in former § 301.7701-2(b)(1) and § 301.7701-2(e) of the Treasury Regulations: 1) continuity of life; 2) centralized management; 3) limited liability; and 4) free transferability of interests. These regulations have now been amended to give the taxpayer a choice of electing taxable status as a partnership or a corporation, irrespective of the business entity's tax attributes.
141. See 2 BUSINESS TRANSACTIONS, supra note 42, at § 23.09 at 23-168.
142. See GmbH § 6 ¶ 1, translated in 1 BUSINESS TRANSACTIONS, supra note 42. See also AktG § 1 ¶ 1, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7; Alting, supra note 28, at 190 (providing an overview of the German and U.S. laws regarding entity recognition and the disregard of the corporate entity in the case of the individual and corporate shareholder).
143. See Alting, supra note 28, at 190 (describing the veil-piercing jurisprudence in Germany).
144. See AktG § 15-19, 290 - 338, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7 (describing four different parent-subsidiary relationships which require one AktG to be dominated by another business enterprise). See also 2 BUSINESS TRANSACTIONS, supra note 42, § 24.05 at 24-148 (Apr. 1994) (indicating that Section 15 Stock Corporation Act 1937 provided : If legally independent enterprises are combined under a centralized management for economic purposes, they form a Konzern; the individual enterprises are Konzern companies. If a legally independent enterprise is controlled by another enterprise because of Participations or otherwise, the controlling and the controlled enterprise together are deemed to form a Konzern and to be individually Konzern companies). See Alting, supra note 28, at 233 (indicating that the term "Konzern" usually refers to the affiliated group of companies and the law is known as the "Konzernrecht"). See also 2 BUSINESS TRANSACTIONS, supra note 42, § 24.05 at 24-148 (Apr. 1994 ) (discussing the history of the Konzern and indicating that originally the Konzern received preferential tax treatment under the Corporation Tax Act of 1920. The 1920 tax code exempted from corporate taxable income dividend income received from companies in which a 25% interest or more was held. The tax rules were changed in 1977 and the corporate level tax on income which is distributed to shareholders has been completely eliminated).
145. See AktG § 302, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7 providing: Assumption of Losses (1) In the case of a control agreement or profit transfer agreement, the other contracting party shall compensate any annual net loss occurring during the term of the agreement to the extent that such loss is not compensated by withdrawing amounts from the profit reserves which were transferred to such reserves during the term of the agreement. (2) If a controlled company has leased or otherwise surrendered the operation of its business to its controlling enterprise, such controlling enterprise shall compensate any annual net loss occurring during the term of the agreement to the extent that the consideration agreed upon for such lease or surrender does not constitute adequate compensation. (3) The company may only waive or compromise any claim for compensation after the expiration of three years from the date on which the registration of the cancellation or termination of the agreement in the commercial register shall be deemed to have been announced pursuant to § 10 of the Commercial Code. The foregoing shall not apply if the party obligated to compensate is insolvent and enters into composition with his creditors to avoid or terminate bankruptcy proceedings. Such waiver or composition shall only become effective if the outside shareholders consent thereto by separate resolution and no minority whose holding in aggregate equals or exceeds one-tenth of the share capital represented at the passing of the resolution has recorded an objection.
146. See Alting, supra note 28, at 234 (noting that the concept of a qualified de facto domination has no statutory basis but has been developed in case law by the Bundesgerichtshof in the context of a dominated GmbH).
147. See Motomura, supra note 17, at 61 (exploring the German and U.S. approach to minority shareholders). 125 See AktG § 290, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7 providing in part: (1) An agreement in which a stock corporation or partnership limited by shares submits the direction of the company to another enterprise ("control agreement") or undertakes to transfer its entire profits to another enterprise ("profit transfer agreements") shall constitute enterprise agreements.
148. Motomura, supra note 17, at 66 n.20 (citing H. WURDINTER, AKTIEN-UND KONZERNRECHT 283 (3rd ed. 1973)).
149. AktG § 17(2), translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7.
150. 2 BUSINESS TRANSACTIONS, supra note 42, at § 24.05 at 24-152 (Apr. 1994) (indicating that in determining whether a loan of a stockholder can be regarded as a contribution to capital, the Federal Court of Justice (Bundesgerichtshof) has ruled that influence can only be presumed if the enterprise holds at least 25 percent of the stock of a corporation, citing BGH WM 1984, 625).
151. AktG § 294 ¶ 2, translated in 1 BUSINESS TRANSACTIONS, supra nole 42, at app. 7 (providing that the agreement only becomes effective upon its registration in the commercial register of the company's domicile).
152. The domination agreement or domination contract is referred to as the Beherrschungsvertrag. See Motomura, supra note 17, at 68.
153. Id. The profit transfer agreement is known as the Gewinnabfuehrungsvertrag. See AktG § 291, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7.
154. See AktG § 308, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7 Providing in part: Power To Direct (1) In the case of a control agreement, the controlling enterprise shall be entitled to issue instructions to the management of the controlled company with respect to management of the controlled company. Unless otherwise provided in such agreement, instructions may be issued which are disadvantaged to the interest of the controlling enterprises or of affiliated enterprise and such controlled company. (2) The management board of the controlled company shall be obligated to comply with the instructions of the controlling enterprise. The management board may not refuse compliance with an instruction on the grounds that such instruction does not in its opinion serve the interests of the controlling enterprise or of affiliated enterprises which are members of the same group as such controlling enterprises and such controlled company unless such instructions manifestly do not serve such interests.
155. AktG. § 291, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7. provides: Control Agreement; Profit Transfer Agreement (1) An agreement in which a stock corporation or partnership limited by shares submits the direction of the company to another enterprise ("control agreement") or undertakes to transfer its entire profits to another enterprise ("profit transfer agreements") shall constitute enterprise agreements. An agreement in which a stock corporation or partnership limited by shares agrees to conduct its business on behalf of another enterprise shall also constitute a profit transfer agreement. Several other types of enterprise agreements are provided for in AktG § 292 entitled "Other Enterprise Agreements." These other agreements include various types of profit sharing agreements including a pooling of profits into a profit pool; a profit arrangemen involving a sharing of profits of a segment of the business; the leasing of one business t another; profit agreements which share profits with members of the management or supervisory board, or with individual employees; and certain business lease arrangements. See AktG § 292, translated in 1 BUSINESS TRANSACTIONS, supra note 42 at app. 7.
156. See AktG § 304, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. I34 (providing for adequate compensation to be paid to outside shareholders in the case of a profit transfer agreement or control or domination agreement).
157. See AktG § 302, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 134.
158. From an accounting standpoint, any deficits are effectively eliminated through the creation of an amount receivable from the controlling company. See 2 BUSINESS TRANSACTIONS, supra note 42, at § 24.05[4] at 24-162 (Apr. 1994).
159. See AktG § 300, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7 (providing for the creation of legal reserves). 138 1 BUSINESS TRANSACTIONS, supra note 42, at § 294.
160. 1 BUSINESS TRANSACTIONS, supra note 42, at § 298 (requiring termination to be promptly reported in the commercial register).
161. 1 BUSINESS TRANSACTIONS, supra note 42, at § 303(1).
162. 1 BUSINESS TRANSACTIONS, supra note 42, at § 303(3).
163. 1 BUSINESS TRANSACTIONS, supra note 42, at § 310 providing in part: (1) The members of the management board and supervisory board of the company shall, in addition to any person liable pursuant to § 309, be jointly and severally liable if they have acted in violation of their duties. In the event of a dispute as to whether they have employed the care of diligent and conscientious manager, they shall bear the burden of proof. (2) The consent of the supervisory board to such act shall not preclude liability for damages. . . .
164. The existence of the Supervisory Board, which is a separate board that oversees the direction of the company, is attractive in Germany apparently because many German banks hold equity interests and seek additional protection for their investments. See Breskovski, supra note 7, at 85 (indicating that a number of Eastern European countries have followed the German legal system which provides for both a Supervisory Board and a Board of Directors, offering a system which provides additional supervision desired by German banks).
165. See AktG. § 309, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7 (providing that the legal representatives of the controlled enterprise have the burden of proving that they acted with the care of a diligent and conscientious manager). 145 See AktG. § 311, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7 (requiring that if compensation is not made during the fiscal year in which the controlled company has incurred the disadvantage, the time and means of the compensation shall be determined no later than by the end of the fiscal year).
166. See AktG. § 312, translated in 1 BUSINESS TRANSACTIONS, supra note 42 (providing detailed rules governing the report on relations with affiliated enterprises). See 2 BUSINESS TRANSACTIONS, supra note 42, at § 24.05(6] at 24-170-171(Apr. 1994) (discussing the reporting and auditing requirements of the De Facto Konzern). See Alting, supra note 28, at 238 (indicating that because of the difficulty of stating a cause of action and proving specific damages, commentators have criticized the de facto Konzern as being ineffective In addition, the controlling company is not directly liable to creditors of the controlled company).
167. See AktG § 312 at ¶ 1, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7.
168. See AktG. § 312 at ¶ 2, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7.
169. See AktG § 313, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7 (referring to Audit By External Auditors).
170. See AktG § 314, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7 (referring to Examination By Supervisory Board).
171. See AktG § 315, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7 (referring to Special Audit). 152 See AktG § 315, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at ¶ 1-3.
172. See AktG § 311, translated in 1 BUSINESS TRANSACTIONS, supra note 42.
173. See Alting, supra note 28, at 240 (indicating that there are no German rules comparable to the broad discovery rules applicable under Fed. R. Civ. P. 26-37 and that AktG §§ 313-15 gives the shareholder rights to information at the shareholders meeting but that unlike accountants, who are entitled to comprehensive information, shareholders' rights to information are restricted except for the ability to demand the court appointment of accountants for special purposes under AktG § 315).
174. Alting, supra note 28, at 241.
175. See Alting, supra note 28, at 242-43.
176. See Alting, supra note 28, at 242-43.
177. See Alting, supra note 28, at 242-43.
178. BGHZ 95, 330, 1986 NJW 188.
179. See Alting, supra note 28, at 244 (discussing Autokran case). See also Stohlmeier, supra note 42, at 135 (providing an overview of German corporate law and the potential liability of a parent company under both statute and case law).
180. See AktG § 303, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7 (providing in part, that upon termination or cancellation of a control agreement or a profit transfer agreement, the controlling enterprise must provide security for the debts owed to creditors as of the time of the cancellation of the agreement. In lieu of security, the controlling enterprise may guarantee the debts).
181. BGHZ 107, 7, 1989 NJW 1800; Alting, supra note 28, at 245 (discussing the court's analogy of the facts to AktG 302). See also Stohlmeier, supra note 42, at 135 (discussing the case and its business implications).
182. AktG. § 302, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7 (providing that in the case of a control agreement or a profit transfer agreement the dominating enterprise must compensate the dominated company for annual net losses). See Alting, supra note 28, at 245 (discussing the control agreeements). 164 T-Baubetreuungsgesellschaft mit schrankter Haftung (TBB), BGHZ, 1993 NJW 1200. This is a decision of the Bundesgerichtshof.
183. Id.
184. Id. at 1203.
185. Id.
186. See Case Commentary, 1994 NJW 2980. This is a decision of the Rechtsprechung der Oberlandesgrerichte in Zinilsachen (OLGZ), a trial court in Munich. See Alting, supra note 28, at 246 (indicating that the case affirmed TBB, 1993 NJW 1200, which required "abusive control" to justify the creation of a Qualified De Facto Konzern).
187. See Case Commentary, 1994 NJW 2980, 3246.
188. The AktG is the only codification which specifically deals with parent-subsidiary relationships. See Motomura, supra note 17, at 66 (indicating that the German Stock Corporation law is the world's only codification of parent subsidiary relationships and as such has served as a model for separate codification proposals in Europe).
189. Salomon v. Salomon & Co. [1897] A. C. 22 (C.A.). See BEAUFORT, supra note 28, § 2.1503 at 2206 (discussing the principle of the separate corporate entity under English law).
190. Wallerstein v. Moir, 3 All E.R. 217 (C.A. 1974).
191. See Wates Bldg Group Ltd. v. Jones, Transcript of Hearing Feb. 5, 1996 (C.A.) (observing, "As to the doctrine of piercing the corporate veil, on which much argument was addressed to us, it must be borne in mind that this is a doctrine of very limited application in very special circumstances"); Adams v. Cape Indus., 2 W.L.R. 657 (C.A.1990) (determining not to enforce a default judment by a Texas Court against an English parent company. In reaching its decision the court observed that if a company chooses to arrange the affairs of its group in such a way that the business carried on in a particular foreign country is the business of its subsidiary and not its own, it is entitled to do so, and it is not open to the court to disregard the separate corporate entity merely because it is just to do so); Galmerrow Sec. Ltd. v. Nat'l Westminster Bank, Transcript of Hearing December 20, 1993 (Ch.) (indicating that in some special cases the court may look through the company and see its wholly controlling shareholder but that the cases in which the court has done so are rare); Woolfson v. Strathclyde Reg'l Council, 1978 SC 90, 1978 SLT 159 (H.L.1978) (refusing to pierce the corporate veil between a corporation and an individual shareholder for purposes of determining entitlement to an award for , damages for the disturbance of the use of property). But see Littlewoods Mail Order Stores, Ltd. v. I.R.C., 1 W.L.R. 1241 (C.A. 1969) (involving piercing the corporate veil between a parent and subsidiary in order to deny a tax deduction which was taken in connection with the acquisition of property in which the court interpreted its authority to pierce broadly).
192. See infra note 222 (discussing Jones v. Lipman, 1 W.L.R. 832 (C. A. 1962)).
193. See CHANCE, supra note 19, § 18.03(7), at 18-39 (providing a detailed overview of corporate and tax law in the UK, including an analysis of the resolution of shareholder disputes in the private company).
194. See Companies Act 1985, ch.1 § 1(2) providing: A company so formed may be either: a) a company having the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them ("a company limited by shares"); b) a company having the liability of its members limited by the memorandum to such amount as the members may respectively thereby undertake to contribute to the assets of the company in the event of its being wound up ("a company limited by guarantee"); or c) a company not having any limit on the liability of its members ("an unlimited company"). § 3(1) further provides in part: (1) Subject to the provisions of sections 1 and 2, the form of the memorandum of association of: a) a public company, being a company limited by shares, b) a public company, being a company limited by guarantee and having a share capital, c) a private company limited by shares, d) a private company limited by guarantee and not having a share capital, e) a private company limited by guarantee and having a share capital, and f) an unlimited company having a share capital, shall be specified respectively for such companies by regulations made by the Secretary of State, or as near to that form as circumstances admit.
195. Id. at Ch. 1 § 3 defines a public company as: A company limited by shares or limited by guarantee and having a share capital, being a company: a) the memorandum of which states that it is to be a public company, and b) in relation to which the provision of this Act or the former Companies Acts as to the registration of a company as a public company have been complied with on or after December 22, 1980.
196. Id.
197. See CHANCE, supra note 19, § 18.02, at 18-7 (providing an excellent commentary on the different types of companies in the UK).
198. See CHANCE, supra note 19, § 18.02, at 18-7.
199. M. Freeman Durham, The Companies Act, 1980: Its Effects on British Corporate Law, 4 Nw. J. INT'L L. & BUS. 551, 553 (1982) (outlining the major changes in corporate law introduced in the corporate law of Great Britain which introduced rules regarding director conflicts of interest, special rules regarding insider trading, and revised remedies for minority shareholders).
200. Companies Act 1985, ch. I § 117 (1) (requiring public companies to obtain certificate prior to conducting business).
201. See id. §§ 11, 118 (providing for minimum authorized capital in the case of public entities).
202. See id. Part IX § 282(1) (providing that a company registered on or after November 1, 1929 (other than a private company) shall have at least two directors and every private company shall have at least one director. Companies registered before November 1, 1929 (other than private companies) are required to have only one director).
203. See Id. Part VIII § 272 which sets forth the statutory requirements with regard to interim accounts for public companies including § 384 which imposes upon all companies the duty to have an auditor. 186 See Id. Part IX § 282 providing: 1) Every company registered on or after November 1, 1929 (other than a private company) shall have at least two directors. 2) Every company registered before that date (other than a private company) shall have at least one director. 3) Every private company shall have at least one director.
204. See id. §§ 283, 384 (providing in part that every company shall appoint an auditor or auditors). See CHANCE, supra note 19, § 18.03, at 18-22 (indicating that every registered company must have directors, a secretary and an auditor, all of whom have statutory duties).
205. See Companies Act 1985, § 240. See also CHANCE, supra note 19, § 21.02, at 21-9 to 21-10 (indicating that the auditor must express whether, in his or her opinion, the annual accounts have been properly prepared in accordance with the Companies Act and, in particular, whether a true and fair view has been given of the state of the affairs of the company or the group).
206. See CHANCE, supra note 19, § 21.02, at 21-13 (indicating that companies which qualify as small businesses for two years in a row may exclude their profit and loss account and most of the notes to the accounts. Medium-sized companies may exclude some of the details of the profit and loss statements).
207. Companies Act 1985, §§ 227, 249(3). See also CHANCE, supra note 19, § 21.02 at 21-11.
208. See Blumberg, The Corporate Entity in An Era of Multinational Corporations, supra note 11, at 299 (indicating that the concept of the separate legal personality was embraced by the English legal system long before the American Revolution). See also BEAUFORT, supra note 28, § 2.1501 at 2205, stating: A corporation is not, like a partnership in English law or a family, a mere collection or aggregation of individuals. In the eyes of the law it is a person distinct from its members or shareholders, a metaphysical entity or a fiction of law, with legal but no physical existence. It is, as Lord Selborne said, a mere abstraction of law. See Blumberg, supra note 47, at 584 (emphasizing that the railways led the way to limited liability. The railways required heavy capital investment which led to the establishment of an active securities market in England. The railways also had a heavy exposure to tort liability. These factors paved the way to widespread acceptance of the principle of limited liability).
209. Blumberg, supra note 47, at 584.
210. [1897] A. C. 22 (refusing to pierce the corporate veil to impose liability upon the shareholder).
211. Id. at 23.
212. Id.
213. Id.
214. Id.
215. See BEAUFORT, supra note 28, § 2.1519 at 2223. 200 See BEAUFORT, supra note 28 (emphasizing that the rule in Salomon's case is still the principle and the instances of piercing the veil are the exceptions, though their number is growing).
216. See Re H., 2 All E.R. 391 (C.A. 1996) in which the Court stressed that it could pierce the corporate veil and treat the corporate assets as realizable property indicating: Where a defendant had used the corporate structure as a device or facade to conceal criminal activities the court could lift the corporate veil and treat the assets of the company as realizable property under the 1988 Act (Criminal Justice Act 1988). See also BEAUFORT, supra note 28, § 2.1520, at 2224 indicating: [T]he courts have further shown themselves willing to lift the veil where the device of incorporation is used for some illegal or improper purpose. The nature and extent of shareholder control required to trigger veil-piercing is not always clear. See Sec. Exch. Ltd. v. Gordon, Hearing date October 7, 1988, (C.A.) (indicating there can be no question of piercing the corporate veil unless the person sought to be unmasked has control, but failing to define the term "control").
217. See Acatos & Hutcheson v. Watson, 1995 1 BCLC 218, 1995 BCC 446 (Ch.).
218. Merchandise Transp. Ltd. v. British Transp. Comm'n, [1962] 2 Q.B. 173.
219. Id.
220. Jones v. Lipman, 1 W.L.R. 832 (C.A.1962). The court refused to permit the shareholder from violating the terms of a contract to purchase property by transferring the property to a corporate entity.
221. Re A Company Ltd., 205 BCLC 333 (C.A. 1985).
222. Id.
223. Id.
224. Re H, 2 All E.R. 391(C.A. 1996).
225. Id.
226. Creasy v. Breachood Motors, Ltd., 1993 BCLC 480, 1992 BCC 638 (Q.B. 1993).
227. Id.
228. See Wallerstein v. Moir, 2 All E.R. 217 (C.A. 1974) (involving director liability for procuring loan which was used to purchase company shares).
229. Id.
230. Id. at 241. The court cited the shareholder's intermingling of funds and personal domination of the corporate entity, indicating: It is plain that Dr. Wallersteiner used many companies, trusts, or other legal entities as if they belonged to him. He was in control of them as much as any 'one-man company' is under the control of the one man who owns all the shares and is the chairman and managing director. He made contracts of enormous magnitude on their behalf on a sheet of notepaper without reference to anyone else...He used their monies as if they were his own...When money was paid to him for shares which he himself owned beneficially, he banked it in the name of IFT of Nassau [the corporate name]. . . they [the legal entities] were just the puppets of Dr. Wallersteiner. He controlled their every movement. Each danced to his bidding. He pulled the strings. No one else got within reach of them . . . they were his agents to do as he commanded. He was the principal behind them. I am of the opinion that the court should pull aside the corporate veil and treat these concerns as being his creatures - for whose doings he should be, and is, responsible. See Amalgamated Inv. & Property Co. Ltd. v. Texas Commerce Int'l Bank Ltd., [1992] Q.B. 84, 3 All E.R. 577, 3 WLR 565, 1 Lloyds Rep. 27 (C.A. 1982) (indicating that the corporate veil of a bank's Bahamas subsidiary was pierced where the subsidiary company did "exactly what the parent company told it to do." The subsidiary was used as a conduit for loaning money and received no fees itself. The subsidiary had no profits or losses and engaged in only "paper transactions." A careful reading of the case, however reflects that the holding is based on the doctrine of estoppel rather than on the theory that the veil should be pierced between the parent and subsidiary banks); City of Glasgow v. Hamlet Textiles Ltd., [1986] SLT 415 (Scot. 2d Div. App. from Sheriff Court ) (involving the refusal of the court to dismiss an action against a corporate shareholder where there was evidence that the parent corporation's subsidiary was merely a corporate shell holding real estate without itself conducting business. The subsidiary corporation owned title to property which had been damaged by fire and the municipality sought damages for costs it had incurred in demolishing the premises. The parent company argued that the case should be dismissed because the subsidiary company rather than the parent owned the property in question and the court lacked jurisdiction over the parent whose offices were outside the jurisdiction of the court. Although the court did not rule on the merits of the veil-piercing argument, it refused to dismiss the lawsuit at its then preliminary stage).
231. Re Polly Peck Int'l, 2 All E.R. 433, [1996] 1 BCLC 428 (Ch. 1996).
232. Id.
233. See Acatos & Hutcheson v. Wattson, [1995]1 BCLC 218, [1995] BCC 446 (Ch.1995). It should be noted that in some very specific areas of regulatory law such as competition law or U.K. employment law, the parent and subsidiary have been treated as one legal entity for some purposes. See Revlon Inc. v. Cripps & Lee, [1980] F.S.R. 85 (Ch. 1980) (involving an alleged trademark infringement where the defendant purchased the goods in the U.S. which the Revlon parent had made available. The defendant wished to import the goods for sale in the U.K. even though a Revlon subsidiary in the U.K. had the exclusive right to market the goods in the U.K. The Court of Appeal refused to incorporate in the analysis the broad rationale of piercing the corporate veil, yet treated the trademark as an asset of the Revlon group based on the factual relationship among the affiliates); Winthrop Products Inc. v. Sun Ocean, 1988 MLJ Lexis 584, 1988-2 MLJ 317 (analyzing a case of trademark infringement by considering activities of the entire group of affiliated companies); Kapur v. Shields, 1 All E.R. 873, 1 W.L.R. 131 (Q.B. 1976) (addressing the question of whether the individual companies within an affiliated group are counted as one corporation or as separate companies for purposes of determining if an employer has employed four persons or more under § 27(1) of the 1971 Act extending employee protection against unfair dismissal and concluding that the entities should be regarded as one). In the context of determining the entitlement to receive government compensation for injury to a business where the land was held by one entity and the business by another, the unity of the parent and subsidiary company justified an award of compensation; DHN Food Distrib. Ltd. v. London Borough of Tower Hamlets, 3 All E.R 462 (C. A. 1976) (involving the London Bureau of Tower Hamlets which seized property which was owned by a subsidiary company and used by the parent company for the conduct of its import and export grocery business. The government compensated the subsidiary for the value of the land, but refused to award the parent company compensation for the disturbance in having its business closed down, since the parent had no interest in the land. The Court of Appeal ruled that the companies should be treated as one entity and the parent should be entitled to claim compensation for the disturbance). But see Woolfson v. Strathclyde Reg'l Council, [1978] SC 90, [1978] SLT 159 (Eng. H.L. 1978) (involving a decision by the House of Lords, which refused to compensate a company for disturbing its occupancy of land where the land was owned by a shareholder).
234. See Adams v. Cape Indus., 2 W.L.R. 657 (C.A.1990) (involving a group of companies engaged in mining operations in which the court refused to embrace the theory that the parent and subsidiary should be regarded as one enterprise because of the single integrated nature of the business).
235. It has been emphasized that the doctrine of corporate limited liability under U.K. law is the principle, and that instances of piercing the corporate veil are the exceptions, though their number is growing. See BEAUFORT, supra note 28, § 2.1519 (1997). Veil-piercing in the U.S. also has been described as an exception to the general rule. See Amfac Foods, Inc., 654 P.2d 1092, 1098 (Ore. 1982) (referring to the disregard of a legally established corporate entity as an extraordinary remedy). Nevertheless, veil-piercing in the U.S. remains a highly litigated issue in corporate law. See Thompson, supra note 20, at 1036.
236. Unlike U.S. or U.K. law, German law provides a statutory codification referred to as the Konzemrecht, or law of controlled companies, which holds a controlling corporation liable for the obligations of a controlled corporation in certain circumstances. See infra notes 119-28 and accompanying text (discussing the Konzernrecht)
237. See Thompson, supra note 20, at 1036.
238. Id. (indicating that courts seldom interfere with the bargain reached by the parties unless there is some reason to invalidate the agreement such as fraud or something approaching fraud). Fraud as well as veil-piercing arguments have been advanced in the same case. African Metals Corp. v. Bullowa, 41 N.E.2d 466 (N.Y. 1942) (involving the use of an undercapitalized corporation in a scheme to sell nickel cathodes which turned out to be scrap iron); Anderson v. Kennebec River Pulp & Paper Co., 433 A.2d 752 (Me. 1981) (involving an attempt to hold a parent company liable for salary owed by its subsidiary when the corporate officers allegedly promised plaintiffs that the parent company would stand behind their salaries despite financial difficulties); Truckweld Equip. Co. v. Olson, 618 P.2d 1017, 1021 (Wash. App. 1980) (indicating that typically the injustice triggering veil-piercing is fraud, misrepresentation, or some form of manipulation); Sprecher v. Weston's Bar, 253 N.W.2d 493, 498 (Wis. 1977) (indicating that the corporate fiction may be disregarded if it is used to commit fraud).
239. See DeWitt Truck Brokers v. W. Ray Flemming Fruit Co., 540 F.2d 681(4th Cir. 1976) (indicating that disregarding the corporate shield is justified where the corporation is undercapitalized, formalities are disregarded, there has been nonpayment of dividends, siphoning off of corporation's funds by the dominant shareholder, and nonfunctioning of corporate officers and directors); Lowendahl v. Baltimore & O.R. Co., 6 N.E.2d 56 (N.Y. 1936) (holding that the defendants were not liable to plaintiffs on the theory that their corporation was their agent or instrumentality because there was no evidence that they knew of the plaintiffs claim at the time they organized the corporation or used the corporation to defraud or evade existing obligations); Brunswick Corp. v. Waxman, 459 F. Supp. 1222 (E.D.N.Y. 1978) (refusing to pierce the corporate veil where the defendant corporation was formed and operated as a no-asset corporation. The plaintiff was not mislead into doing business with the no-asset corporation and was not wronged. The opinion underscores the importance of fraudulent or misleading conduct in supporting veil-piercing); Walkovszky v. Carlton, 223 N.E 2d 6 (N.Y. 1966) (upholding the defendant's right to incorporate ten taxi cab corporations in the conduct of business and refusing to pierce the corporate veil where the defendant had the legally required amount of insurance. The court emphasized that there was nothing illicit or fraudulent about the use of multiple corporations). See the empirical study of veil-piercing by Thompson, supra note 20, at 1064 (indicating that misrepresentation was found in 169 cases). Of these 169 cases, the courts pierced the corporate veil in 159, at a rate of 94%. See also discussion of veil-piercing by O'NEILL & THOMPSON, supra note 28, at § 1.10, 47-48, nn.3-5. For further discusion, see infra notes 46-95 and accompanying text (discussing veil-piercing under U.S. law).
240. See Wallersteiner v. Moir, 2 All E.R. 217, 1 W.L.R. 991 (C.A.1974) (involving allegations of fraud, misfeasance and breach of trust with regard to a shareholder who had gained control of a substantial public company. It was alleged that the defendant had used a number of legal entities as puppets and that the court should pull aside the corporate veil and treat the defendant as his creatures. The court agreed with the plaintiff and pierced the veil with respect to several legal entities, and imposed responsibility for their conduct upon the defendant.).
241. See supra notes 170-219 and accompanying text (discussing U.K. law); Wates Building Group Ltd. v. Jones, Transcript of Hearing Feb. 5, 1996 (C. A. 1996); Adams v. Cape Indus., 2 W.L.R. 657 (C.A.1990). See also Galmerrow Sec. Ltd. v. Nat'l Westminster Bank, Transcript of Hearing December 20, 1993 (Ch.); Woolfson v. Strathclyde Reg'l Council, 1978 SC 90, 1978 SLT 159 (H.L.1978).
242. See supra notes 96-169 and accompanying text (discussing the Aktiengesellschaft or AG which is governed by the Aktiengesetz or Stock Corporation Act). In the case of the AG, specific statutory provisions address the liability of a dominating enterprise upon a dominated enterprise. See AktG § 291-336 at¶ 2, translated in 1 BUSINESS TRANSACTIONS, supra note 42. In Germany, the Stock Corporation is comparable to a publicly-traded American corporation. According to one estimate, there are approximately 3,000 AGs in Germany. See Stohlmeier, supra note 42, at 135 (indicating that the AG is comparable to the American or English publicly-owned company and that there are only approximately 3,000 in existence).
243. See supra notes 96-169 and accompanying text.
244. See Stohlmeier, supra note 42, at 137 (indicating that domination by the parent can lead to parental liability). See Wallersteiner v. Moir, 2 All E.R. 217, 1 W.L.R. 991 (C.A.1974); Jon-T Chemical, Inc., 768 F.2d 686 (5th Cir. 1985) (underscoring the importance of control under U.K. law).
245. The failure to maintain arms length relationships was specifically mentioned as a factor under U.S. law in Laya v. Erin Homes, Inc., 352 S.E.2d 93, 97 (W.Va. 1986).
246. See Milton Bordwin, Corporate Liability Gets Personal, SMALL Bus. REPORTS, Jan. 1994, at 41,44 (discussing the care with which legal documents must be signed. Although the discussion refers to the potential imposition of liability upon the individual rather than corporate shareholder, the analysis appears to be equally relevant to the corporate shareholder).
247. See Wallersteiner v. Moir, 2 All E.R. 217, 1 W.L.R. 991 (C.A.1974) (including a discussion of domination involved in veil-piercing law in the U.K.). Under German law, the contractual Konzern consists of controlling and controlled business enterprises. See AktG. § 294 ¶2, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7. The De Facto Konzern involves non arms-length transactions where there is a disadvantageous transaction under AktG § 311. The Qualified De Facto Konzern arises under case law involving the domination of a private limited liability company. See infra notes 96-169 and accompanying text (discussing the De Facto and the Qualified De Facto Konzern). Under U.S. law, veil-piercing arises in the context of the total domination by the parent corporation of the subsidiary company. See United States v. Jon-T Chemicals, Inc., 768 F.2d 686, 691 (5th Cir. 1985) (discussing domination as a critical factor in supporting veil-piercing ).
248. Stohlmeier, supra note 42, at 237 (warning that the parent assumes the GmbH's obligations and liabilities if it continuously and closely directs and carries out the business transactions of the GmbH).
249. See AktG. § 311 translated in 2 BUSINESS TRANSACTIONS, supra note 42, at app. 7, and § 24.05 at 24-169 (1997).
250. I.R.C. § 482 (West 1997) and Treasury Regulations thereunder which gives the I.R.S. discretion to reallocate items of income, loss, deduction and credit among related parties and establishes methods for determining the arms length price for intercompany sales and other transactions.
251. See supra notes 129-44 and accompanying text (discussing the contractual Konzern). See also AktG § 290, translated in BUSINESS TRANSACTIONS, supra note 42, at § 290, at app. 7.
252. See supra notes 96-169 and accompanying text (discussing the contractual Konzern).
253. African Metals Corp. v. Bullowa, 41 N.E.2d 466 (N. Y. 1942) (involving the use of an undercapitalized corporation in a scheme to sell nickel cathodes which turned out to be scrap iron); Anderson v. Kennebec River Pulp & Paper Co., 433 A.2d 752 (Me. 1981) (involving an attempt to hold a parent company liable for salary owed by its subsidiary when the corporate officers allegedly promised plaintiffs that the parent company would stand behind their salaries despite financial difficulties); Truckweld Equip. Co. v. Olson, 618 P.2d 1017, 1021 (Wash. App. 1980) (indicating that typically the injustice triggering veil-piercing is fraud, misrepresentation, or some form of manipulation); Sprecher v. Weston's Bar, 253 N.W. 2d 493, 498 (Wis. 1977) (indicating that the corporate fiction may be disregarded if it is used to commit fraud). See Lowendahl v. Baltimore & O.R. Co., 6 N.E.2d 56 (N.Y. 1936) (holding that the defendants were not liable to plaintiffs on the theory that their corporation was their agent or instrumentality because there was no evidence that they knew of the plaintiffs claim at the time they organized the corporation or used the corporation to defraud or evade existing obligations); Brunswick Corp. v. Waxman, 459 F. Supp. 1222 (E.D.N.Y. 1978) (refusing to pierce the corporate veil where he defendant corporation was formed and operated as a no-asset corporation; Thompson, supra note 20, at 1064 (finding misrepresentation in 169 cases, of which piercing occurred in 159, at a rate of 94%).
254. 768 F.2d 686, 691 (5th Cir. 1985).
255. Id.
256. See the recommendations of William O.Douglas & Carrol M. Shanks, Insulation From Liability Through Subsidiary Corporations, 39 YALE L.J. 193 (1929) (outlining four standards which would keep business units from being treated as assimilated including recommendations to: 1) establish and maintain separate financial units which are sufficiently financed so that they can sustain normal strains; 2) separate day-to-day business operations of each unit; 3) maintain formal barriers between two management structures such as separate board meetings; 4) the separate units should not present themselves as being one unit. The importance of signing legal documents with care was raised in connection with the discussion of liability under guarantee and loan documents). See Christine P. Andrews et al., What A CPA Should Know Before A Business Fails, J. ACCT. 34, 38 (1991). It is equally important to precisely identify which separate company or companies are liable under other documents in addition to guarantees and loans.
257. The Internal Revenue Code and its regulations contain special provisions requiring the use of arms-length pricing methodology for intercompany transactions and significant penalties for noncompliance with the transfer pricing rules. See I.R.C. §§ 482, 6662 (West 1997).
258. In Thompson's empirical research, undercapitalization was mentioned in 19% of the contract cases in which the courts pierced the corporate veil. See Thompson, supra note 20, at 1058. As many as nineteen factors have been cited as being relevant to a determination of whether to pierce the corporate veil under U.S. law including undercapitalization. See Laya v. Erin Homes, Inc., 352 S.E.2d 93, 98 (W.Va. 1986).
259. The use of the same officers for both parent and subsidiary companies was cited in United States v. Jon-T Chemicals Inc., 768 F.2d 686, 691 (5th Cir. 1985).
260. See Douglas P. Krevolin, How To Ensure That The Corporate Entity Will Be Recognized For Tax Purposes, 39 TAXATION FOR ACCOUNTANTS 26 (1987) (stressing the importance of observing formalities and separate books and records for tax purposes. The discussion may also be relevant to preserving the integrity of individual corporations for other legal purposes).
261. Id.
262. See supra notes 60-95 and accompanying text (discussing enterprise liability under statutory law in America). See Heather M. Susac, Romney v. Lin: ERISA Preemption of 630 of New York's Business Corporation Law, 71 ST. JOHN'S L. REV. 691 (1997) (discussing personal liability under ERISA); Mark E. McKane, Operator Liability For Parent Corporations Under CERCLA: A Return To Basics, 91 Nw. U.L. REV. 1642 (1997) (discussing piercing the corporate veil among affiliated corporations).
263. See supra notes 60-95 and accompanying text (discussing enterprise liability under statutory law in America). See Heather M. Susac, Romney v. Lin: ERISA Preemption of 630 of New York's Business Corporation Law, 71 ST. JOHN'S L. REV. 691 (1997) (discussing personal liability under ERISA); Mark E. McKane, Operator Liability For Parent Corporations Under CERCLA: A Return To Basics, 91 Nw. U.L. REV. 1642 (1997) (discussing piercing the corporate veil among affiliated corporations).
264. TREATY ESTABLISHING THE EUROPEAN ECONOMIC COMMUNITY [hereinafter EEC Treaty], Feb. 7, 1992, 1992 O.J. (C224) 1, 1 C.M.L.R. 573 (1992) art. 2.
265. EEC TREATY art. 2 , mandating that a common market be established. It provides in part: The Community shall have as its task, by establishing a common market and an economic and monetary union and by implementing the common policies or activities referred to in Articles 3 and 3a, to promote throughout the Community a harmonious and balanced development of economic activities, sustainable and non-inflationary growth respecting the environment, a high degree of convergence of economic performance, a high level of employment and of social protection, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States.
266. EEC TREATY art. 2 at § 54 (3)(g), which authorizes the adoption of a series of Directives for the purpose of: [Coordinating to the necessary extent the safeguards which, but for the protection of members and others, are required by Member Sates of companies and firms . . . with a view to making such safeguards equivalent throughout the Community.
267. The First Council Directive 8/151, 11 O.J. EUR. COMM. (L 65) 8, 1 Common Mkt. Rep. (CCH) ¶ 1351 (1968) (requiring: 1) public and private companies to disclose the instrument of constitution and statutes and any amendment; 2) the appointment, termination of office, and particulars of those authorized to represent the company in dealings with third parties and in legal proceedings, or involved in the administration, supervision or control of the company; 3) the amount of capital; 4) the annual accounts with the details regarding the persons registered by law to certify the balance sheet; 5) any transfer of the seat of the company; 6) the winding up, declaration of nullity, the appointment of liquidators or termination of the company).
268. See Alfred Conard, The European Alternative To Uniformity In Corporation Laws, 89 MICH. L. REV. 2150, 2171 (1991) (indicating that public and private companies must disclose annually the amount of subscribed capital. Public companies must maintain 25,000 ECU ($25,000) but private companies have no minimum).
269. See Fourth Council Directive, 78/660, 21 O.J. (No. L 222) 11, 1 Common Mkt. Rep. (CCH) ¶ 1371 (1978) (specifying requirements for financial reporting. The Community standards are less stringent than those imposed by U.S. securities laws. Under U.S. securities laws the public company must report quarterly, annually, and when special events occur. While the Fourth Directive's rules are less stringent than their SEC counterpart, they apply broadly to private as well as public companies. Two different systems apply to public and private companies, but even the abridged information required for private companies is substantial. Further, although the Model Business Corporation Act only requires that a company maintain appropriate accounting records, the Fourth Directive requires private as well as public companies to be audited). See Conard, supra note 253, at 2175 (including a detailed discussion of the requirements of the Fourth Directive).
270. Third Council Directive, 78/885, 21 O.J. (L 295) 36, 1 Common Mkt. Rep. (CCH) ¶ 1361 (1978) (addressing mergers). See also Proposal for a Tenth Council Directive on cross-border mergers of public limited liability companies,
271. Sixth Council Directive, 82/891, 25 O.J. (L 378) 47, 1 Common Mkt. Rep. (CCH) ¶ 1411 (1982) (dealing with divisions or split-ups). See also Council Directive 89/592 on Coordinating Regulations on Insider Dealing, 1989 O.J. (L 334) 30 (mandating the member states of the European Union to enact insider-trading legislation). See Dariusz M. Budzen & Ania M. Frankowska, Prohibitions Against Insider Trading in the US and the European Community: Providing Guidance for Legislatures of Eastern Europe, 12 B.U. INT'L L. J. 91 (1994) (comparing the insider trading rules in the US and the European Community); Ronald J. Gilson, The Political Ecology of Takeovers: Thoughts on Harmonizing The European Corporate Governance Environment, 61 FORDHAM L. REV. 161 (1992) (discussing the proposal to harmonize the laws on insider trading within the European Community);
272. Sixth Council Directive, 82/891, 25 O.J. (L 378) 47, 1 Common Mkt. Rep. (CCH) ¶ 1411 (1982) (dealing with divisions or split-ups). See also Council Directive 89/592 on Coordinating Regulations on Insider Dealing, 1989 O.J. (L 334) 30 (mandating the member states of the European Union to enact insider-trading legislation). See Dariusz M. Budzen & Ania M. Frankowska, Prohibitions Against Insider Trading in the US and the European Community: Providing Guidance for Legislatures of Eastern Europe, 12 B.U. INT'L L. J. 91 (1994) (comparing the insider trading rules in the US and the European Community); Ronald J. Gilson, The Political Ecology of Takeovers: Thoughts on Harmonizing The European Corporate Governance Environment, 61 FORDHAM L. REV. 161 (1992) (discussing the proposal to harmonize the laws on insider trading within the European Community);
273. Sixth Council Directive, 82/891, 25 O.J. (L 378) 47, 1 Common Mkt. Rep. (CCH) ¶ 1411 (1982) (dealing with divisions or split-ups). See also Council Directive 89/592 on Coordinating Regulations on Insider Dealing, 1989 O.J. (L 334) 30 (mandating the member states of the European Union to enact insider-trading legislation). See Dariusz M. Budzen & Ania M. Frankowska, Prohibitions Against Insider Trading in the US and the European Community: Providing Guidance for Legislatures of Eastern Europe, 12 B.U. INT'L L. J. 91 (1994) (comparing the insider trading rules in the US and the European Community); Ronald J. Gilson, The Political Ecology of Takeovers: Thoughts on Harmonizing The European Corporate Governance Environment, 61 FORDHAM L. REV. 161 (1992) (discussing the proposal to harmonize the laws on insider trading within the European Community);
274. Stephen J. Leacock, In Search of A Giant Leap: Curtailing Insider Trading in International Securities Markets By the Reform of Insider Trading Laws Under European Union Council Directive 89/592, 3 TULSA J. COMP. & INT'L L. 51 (1995);
275. Lynda M. Riuiz, European. Community Directive on Insider Dealing: A Model For Effective Enforcement of Prohibitions on Insider Trading in International Securities Markets, 33 COLUM. J. TRANSNAT'L L. 217 (1995) (providing a review of the insider trading rules in the US and the European Community).
276. Amended Commission proposal for a Thirteenth Council Directive, 33 O.J. (C 240) 7, 3 Common Mkt. Rep. (CCH) ¶ 60,200 (1990)(concerning takeover and general bids). See Glas Bergstom et al., The Regulation of Corporate Acquisitions: A Law and Economics Analysis, 1995 COLUM. BUS. L. REV. 495 (analyzing the takeover laws in Italy, France, Germany and other European countries and the proposed Thirteenth Directive to monitor corporate takeovers).
277. Twelfth Council Directive, 89/667, 32 O.J. (L 395) 40, 1 Common Mkt. Rep. (CCH) ¶ 1447 (1989) (setting forth standards for one-member companies).
278. European Economic Interest Grouping, Commission Regulation 2137/87, 1985 O.J. (L 199) 1.
279. The EEIG is a legal entity which is governed by Community rules. It permits businesses from different member states to conduct business through the EEIG. However, the members of the EEIG must be completely autonomous from the EEIG and the members are jointly and severally liable for the debts and liabilities of the EEIG. The purpose of the entity is to facilitate collaboration of business enterprises from different states. Businesses from different states may work through the EEIG while still maintaining their independence and without undergoing mergers of any type. At present, the EEIG is not widely used, but has been employed largely by professional groups such as lawyers and public relations consultants who wish to pool their resources. See CARSWELL & DE SARRAU, supra note 5, § 4.09 at 4-65 (providing an overview of the EEIG and indicating that it is patterned after the French Groupement d'Interests Economique). See also Johan de Bruycker, EC Company Law - The European Company v. The European Economic Interest Grouping and the Harmonization of the National Company Laws, 21 GA. J. INT'L & COMP. L. 191 (1991) (examining harmonization efforts and including a discussion of the EEIG).
280. See CARSWELL & DE SARRAU, supra note 5, § 4.05[1] at 4-27.
281. The Draft Fifth Directive provides a system of corporate governance. A companion European Company Statute has been drafted to go along with the Fifth Directive. See The European Company Statute, 1989 O.J. (C 263) 41, 1991 O.J. (C 138) 8, and 1991 O.J. (C 176) 1. Thus far, the Proposals have not been adopted, primarily because of political opposition from the United Kingdom. The Fifth Directive's provisions relating to employee participation in management are a significant concern to the United Kingdom. See John Addison, Recent Developments in Social Policy in the New European Union, 48 INDUS. & LAB. REL. REV. 5 (1994) (discussing the social and labor policy in the European Community); Terence L. Blackburn, The Societas Europa: The Evolving European Company Statute, 61 FORDHAM L. REV. 695 (1993) (reviewing the history of the Fifth Directive in light of the history of the different legal traditions within the European Community); Breskovski, supra note 7, at 91. See also CARSWELL & DE SARRAU, supra note 5, § 4.05 at 4-27 (discussing the original and revised Fifth Directive); Barbara E. Hoecklin, European Company Statute: Company Structure and Employee Involvement Across EC Borders, 16 N.C. J. INT'L L. & COM. REG. 587 (1991) (discussing the history of the European Company Statute, the provisions for employee involvement, and opposing traditions for employee involvement in Germany and the U.K.); Craig L. Jackson, Social Policy Harmonization and Worker Rights in the European Union: A Model For North America?, 21 N.C.J. INT'L L. & COM. REG. 1 (1995) (discussing the social policy of the European Community with emphasis on worker rights); John T. Klaus & J. Hopt, Labor Representation on Corporate Boards: Impacts and Problems For Corporate Governance and Economic Integration in Europe, 14 INT'L REV. L. & ECON. 203 (1994) (discussing the legal and economic effects of the German and Dutch Co-determination model); Marleen A. O'Connor, Symposium: Corporate Malaise - Stakeholder Statutes; Cause or Cure?, 21 STETSON L. REV. 3 (1991) (providing an interesting discussion of the interests which employees, customers, suppliers and other non-shareholders have in corporate decision-making); Clyde W. Summers, Worker Dislocation: Who Bears The Burden? A Comparative Study of Social Values in Five Countries, 70 NOTRE DAME L. REV. 1033 (1995) (comparing the way in which the US, U.K., Germany, Sweden and Japan respond to the problems of instability in employment).
282. The Draft Fifth Directive provides a system of corporate governance. A companion European Company Statute has been drafted to go along with the Fifth Directive. See The European Company Statute, 1989 O.J. (C 263) 41, 1991 O.J. (C 138) 8, and 1991 O.J. (C 176) 1. Thus far, the Proposals have not been adopted, primarily because of political opposition from the United Kingdom. The Fifth Directive's provisions relating to employee participation in management are a significant concern to the United Kingdom. See John Addison, Recent Developments in Social Policy in the New European Union, 48 INDUS. & LAB. REL. REV. 5 (1994) (discussing the social and labor policy in the European Community); Terence L. Blackburn, The Societas Europa: The Evolving European Company Statute, 61 FORDHAM L. REV. 695 (1993) (reviewing the history of the Fifth Directive in light of the history of the different legal traditions within the European Community); Breskovski, supra note 7, at 91. See also CARSWELL & DE SARRAU, supra note 5, § 4.05 at 4-27 (discussing the original and revised Fifth Directive); Barbara E. Hoecklin, European Company Statute: Company Structure and Employee Involvement Across EC Borders, 16 N.C. J. INT'L L. & COM. REG. 587 (1991) (discussing the history of the European Company Statute, the provisions for employee involvement, and opposing traditions for employee involvement in Germany and the U.K.); Craig L. Jackson, Social Policy Harmonization and Worker Rights in the European Union: A Model For North America?, 21 N.C.J. INT'L L. & COM. REG. 1 (1995) (discussing the social policy of the European Community with emphasis on worker rights); John T. Klaus & J. Hopt, Labor Representation on Corporate Boards: Impacts and Problems For Corporate Governance and Economic Integration in Europe, 14 INT'L REV. L. & ECON. 203 (1994) (discussing the legal and economic effects of the German and Dutch Co-determination model); Marleen A. O'Connor, Symposium: Corporate Malaise - Stakeholder Statutes; Cause or Cure?, 21 STETSON L. REV. 3 (1991) (providing an interesting discussion of the interests which employees, customers, suppliers and other non-shareholders have in corporate decision-making); Clyde W. Summers, Worker Dislocation: Who Bears The Burden? A Comparative Study of Social Values in Five Countries, 70 NOTRE DAME L. REV. 1033 (1995) (comparing the way in which the US, U.K., Germany, Sweden and Japan respond to the problems of instability in employment).
283. The Draft Fifth Directive provides a system of corporate governance. A companion European Company Statute has been drafted to go along with the Fifth Directive. See The European Company Statute, 1989 O.J. (C 263) 41, 1991 O.J. (C 138) 8, and 1991 O.J. (C 176) 1. Thus far, the Proposals have not been adopted, primarily because of political opposition from the United Kingdom. The Fifth Directive's provisions relating to employee participation in management are a significant concern to the United Kingdom. See John Addison, Recent Developments in Social Policy in the New European Union, 48 INDUS. & LAB. REL. REV. 5 (1994) (discussing the social and labor policy in the European Community); Terence L. Blackburn, The Societas Europa: The Evolving European Company Statute, 61 FORDHAM L. REV. 695 (1993) (reviewing the history of the Fifth Directive in light of the history of the different legal traditions within the European Community); Breskovski, supra note 7, at 91. See also CARSWELL & DE SARRAU, supra note 5, § 4.05 at 4-27 (discussing the original and revised Fifth Directive); Barbara E. Hoecklin, European Company Statute: Company Structure and Employee Involvement Across EC Borders, 16 N.C. J. INT'L L. & COM. REG. 587 (1991) (discussing the history of the European Company Statute, the provisions for employee involvement, and opposing traditions for employee involvement in Germany and the U.K.); Craig L. Jackson, Social Policy Harmonization and Worker Rights in the European Union: A Model For North America?, 21 N.C.J. INT'L L. & COM. REG. 1 (1995) (discussing the social policy of the European Community with emphasis on worker rights); John T. Klaus & J. Hopt, Labor Representation on Corporate Boards: Impacts and Problems For Corporate Governance and Economic Integration in Europe, 14 INT'L REV. L. & ECON. 203 (1994) (discussing the legal and economic effects of the German and Dutch Co-determination model); Marleen A. O'Connor, Symposium: Corporate Malaise - Stakeholder Statutes; Cause or Cure?, 21 STETSON L. REV. 3 (1991) (providing an interesting discussion of the interests which employees, customers, suppliers and other non-shareholders have in corporate decision-making); Clyde W. Summers, Worker Dislocation: Who Bears The Burden? A Comparative Study of Social Values in Five Countries, 70 NOTRE DAME L. REV. 1033 (1995) (comparing the way in which the US, U.K., Germany, Sweden and Japan respond to the problems of instability in employment).
284. The Draft Fifth Directive provides a system of corporate governance. A companion European Company Statute has been drafted to go along with the Fifth Directive. See The European Company Statute, 1989 O.J. (C 263) 41, 1991 O.J. (C 138) 8, and 1991 O.J. (C 176) 1. Thus far, the Proposals have not been adopted, primarily because of political opposition from the United Kingdom. The Fifth Directive's provisions relating to employee participation in management are a significant concern to the United Kingdom. See John Addison, Recent Developments in Social Policy in the New European Union, 48 INDUS. & LAB. REL. REV. 5 (1994) (discussing the social and labor policy in the European Community); Terence L. Blackburn, The Societas Europa: The Evolving European Company Statute, 61 FORDHAM L. REV. 695 (1993) (reviewing the history of the Fifth Directive in light of the history of the different legal traditions within the European Community); Breskovski, supra note 7, at 91. See also CARSWELL & DE SARRAU, supra note 5, § 4.05 at 4-27 (discussing the original and revised Fifth Directive); Barbara E. Hoecklin, European Company Statute: Company Structure and Employee Involvement Across EC Borders, 16 N.C. J. INT'L L. & COM. REG. 587 (1991) (discussing the history of the European Company Statute, the provisions for employee involvement, and opposing traditions for employee involvement in Germany and the U.K.); Craig L. Jackson, Social Policy Harmonization and Worker Rights in the European Union: A Model For North America?, 21 N.C.J. INT'L L. & COM. REG. 1 (1995) (discussing the social policy of the European Community with emphasis on worker rights); John T. Klaus & J. Hopt, Labor Representation on Corporate Boards: Impacts and Problems For Corporate Governance and Economic Integration in Europe, 14 INT'L REV. L. & ECON. 203 (1994) (discussing the legal and economic effects of the German and Dutch Co-determination model); Marleen A. O'Connor, Symposium: Corporate Malaise - Stakeholder Statutes; Cause or Cure?, 21 STETSON L. REV. 3 (1991) (providing an interesting discussion of the interests which employees, customers, suppliers and other non-shareholders have in corporate decision-making); Clyde W. Summers, Worker Dislocation: Who Bears The Burden? A Comparative Study of Social Values in Five Countries, 70 NOTRE DAME L. REV. 1033 (1995) (comparing the way in which the US, U.K., Germany, Sweden and Japan respond to the problems of instability in employment).
285. The Draft Fifth Directive provides a system of corporate governance. A companion European Company Statute has been drafted to go along with the Fifth Directive. See The European Company Statute, 1989 O.J. (C 263) 41, 1991 O.J. (C 138) 8, and 1991 O.J. (C 176) 1. Thus far, the Proposals have not been adopted, primarily because of political opposition from the United Kingdom. The Fifth Directive's provisions relating to employee participation in management are a significant concern to the United Kingdom. See John Addison, Recent Developments in Social Policy in the New European Union, 48 INDUS. & LAB. REL. REV. 5 (1994) (discussing the social and labor policy in the European Community); Terence L. Blackburn, The Societas Europa: The Evolving European Company Statute, 61 FORDHAM L. REV. 695 (1993) (reviewing the history of the Fifth Directive in light of the history of the different legal traditions within the European Community); Breskovski, supra note 7, at 91. See also CARSWELL & DE SARRAU, supra note 5, § 4.05 at 4-27 (discussing the original and revised Fifth Directive); Barbara E. Hoecklin, European Company Statute: Company Structure and Employee Involvement Across EC Borders, 16 N.C. J. INT'L L. & COM. REG. 587 (1991) (discussing the history of the European Company Statute, the provisions for employee involvement, and opposing traditions for employee involvement in Germany and the U.K.); Craig L. Jackson, Social Policy Harmonization and Worker Rights in the European Union: A Model For North America?, 21 N.C.J. INT'L L. & COM. REG. 1 (1995) (discussing the social policy of the European Community with emphasis on worker rights); John T. Klaus & J. Hopt, Labor Representation on Corporate Boards: Impacts and Problems For Corporate Governance and Economic Integration in Europe, 14 INT'L REV. L. & ECON. 203 (1994) (discussing the legal and economic effects of the German and Dutch Co-determination model); Marleen A. O'Connor, Symposium: Corporate Malaise - Stakeholder Statutes; Cause or Cure?, 21 STETSON L. REV. 3 (1991) (providing an interesting discussion of the interests which employees, customers, suppliers and other non-shareholders have in corporate decision-making); Clyde W. Summers, Worker Dislocation: Who Bears The Burden? A Comparative Study of Social Values in Five Countries, 70 NOTRE DAME L. REV. 1033 (1995) (comparing the way in which the US, U.K., Germany, Sweden and Japan respond to the problems of instability in employment).
286. The Draft Fifth Directive provides a system of corporate governance. A companion European Company Statute has been drafted to go along with the Fifth Directive. See The European Company Statute, 1989 O.J. (C 263) 41, 1991 O.J. (C 138) 8, and 1991 O.J. (C 176) 1. Thus far, the Proposals have not been adopted, primarily because of political opposition from the United Kingdom. The Fifth Directive's provisions relating to employee participation in management are a significant concern to the United Kingdom. See John Addison, Recent Developments in Social Policy in the New European Union, 48 INDUS. & LAB. REL. REV. 5 (1994) (discussing the social and labor policy in the European Community); Terence L. Blackburn, The Societas Europa: The Evolving European Company Statute, 61 FORDHAM L. REV. 695 (1993) (reviewing the history of the Fifth Directive in light of the history of the different legal traditions within the European Community); Breskovski, supra note 7, at 91. See also CARSWELL & DE SARRAU, supra note 5, § 4.05 at 4-27 (discussing the original and revised Fifth Directive); Barbara E. Hoecklin, European Company Statute: Company Structure and Employee Involvement Across EC Borders, 16 N.C. J. INT'L L. & COM. REG. 587 (1991) (discussing the history of the European Company Statute, the provisions for employee involvement, and opposing traditions for employee involvement in Germany and the U.K.); Craig L. Jackson, Social Policy Harmonization and Worker Rights in the European Union: A Model For North America?, 21 N.C.J. INT'L L. & COM. REG. 1 (1995) (discussing the social policy of the European Community with emphasis on worker rights); John T. Klaus & J. Hopt, Labor Representation on Corporate Boards: Impacts and Problems For Corporate Governance and Economic Integration in Europe, 14 INT'L REV. L. & ECON. 203 (1994) (discussing the legal and economic effects of the German and Dutch Co-determination model); Marleen A. O'Connor, Symposium: Corporate Malaise - Stakeholder Statutes; Cause or Cure?, 21 STETSON L. REV. 3 (1991) (providing an interesting discussion of the interests which employees, customers, suppliers and other non-shareholders have in corporate decision-making); Clyde W. Summers, Worker Dislocation: Who Bears The Burden? A Comparative Study of Social Values in Five Countries, 70 NOTRE DAME L. REV. 1033 (1995) (comparing the way in which the US, U.K., Germany, Sweden and Japan respond to the problems of instability in employment).
287. The Draft Fifth Directive provides a system of corporate governance. A companion European Company Statute has been drafted to go along with the Fifth Directive. See The European Company Statute, 1989 O.J. (C 263) 41, 1991 O.J. (C 138) 8, and 1991 O.J. (C 176) 1. Thus far, the Proposals have not been adopted, primarily because of political opposition from the United Kingdom. The Fifth Directive's provisions relating to employee participation in management are a significant concern to the United Kingdom. See John Addison, Recent Developments in Social Policy in the New European Union, 48 INDUS. & LAB. REL. REV. 5 (1994) (discussing the social and labor policy in the European Community); Terence L. Blackburn, The Societas Europa: The Evolving European Company Statute, 61 FORDHAM L. REV. 695 (1993) (reviewing the history of the Fifth Directive in light of the history of the different legal traditions within the European Community); Breskovski, supra note 7, at 91. See also CARSWELL & DE SARRAU, supra note 5, § 4.05 at 4-27 (discussing the original and revised Fifth Directive); Barbara E. Hoecklin, European Company Statute: Company Structure and Employee Involvement Across EC Borders, 16 N.C. J. INT'L L. & COM. REG. 587 (1991) (discussing the history of the European Company Statute, the provisions for employee involvement, and opposing traditions for employee involvement in Germany and the U.K.); Craig L. Jackson, Social Policy Harmonization and Worker Rights in the European Union: A Model For North America?, 21 N.C.J. INT'L L. & COM. REG. 1 (1995) (discussing the social policy of the European Community with emphasis on worker rights); John T. Klaus & J. Hopt, Labor Representation on Corporate Boards: Impacts and Problems For Corporate Governance and Economic Integration in Europe, 14 INT'L REV. L. & ECON. 203 (1994) (discussing the legal and economic effects of the German and Dutch Co-determination model); Marleen A. O'Connor, Symposium: Corporate Malaise - Stakeholder Statutes; Cause or Cure?, 21 STETSON L. REV. 3 (1991) (providing an interesting discussion of the interests which employees, customers, suppliers and other non-shareholders have in corporate decision-making); Clyde W. Summers, Worker Dislocation: Who Bears The Burden? A Comparative Study of Social Values in Five Countries, 70 NOTRE DAME L. REV. 1033 (1995) (comparing the way in which the US, U.K., Germany, Sweden and Japan respond to the problems of instability in employment).
288. The Draft Fifth Directive provides a system of corporate governance. A companion European Company Statute has been drafted to go along with the Fifth Directive. See The European Company Statute, 1989 O.J. (C 263) 41, 1991 O.J. (C 138) 8, and 1991 O.J. (C 176) 1. Thus far, the Proposals have not been adopted, primarily because of political opposition from the United Kingdom. The Fifth Directive's provisions relating to employee participation in management are a significant concern to the United Kingdom. See John Addison, Recent Developments in Social Policy in the New European Union, 48 INDUS. & LAB. REL. REV. 5 (1994) (discussing the social and labor policy in the European Community); Terence L. Blackburn, The Societas Europa: The Evolving European Company Statute, 61 FORDHAM L. REV. 695 (1993) (reviewing the history of the Fifth Directive in light of the history of the different legal traditions within the European Community); Breskovski, supra note 7, at 91. See also CARSWELL & DE SARRAU, supra note 5, § 4.05 at 4-27 (discussing the original and revised Fifth Directive); Barbara E. Hoecklin, European Company Statute: Company Structure and Employee Involvement Across EC Borders, 16 N.C. J. INT'L L. & COM. REG. 587 (1991) (discussing the history of the European Company Statute, the provisions for employee involvement, and opposing traditions for employee involvement in Germany and the U.K.); Craig L. Jackson, Social Policy Harmonization and Worker Rights in the European Union: A Model For North America?, 21 N.C.J. INT'L L. & COM. REG. 1 (1995) (discussing the social policy of the European Community with emphasis on worker rights); John T. Klaus & J. Hopt, Labor Representation on Corporate Boards: Impacts and Problems For Corporate Governance and Economic Integration in Europe, 14 INT'L REV. L. & ECON. 203 (1994) (discussing the legal and economic effects of the German and Dutch Co-determination model); Marleen A. O'Connor, Symposium: Corporate Malaise - Stakeholder Statutes; Cause or Cure?, 21 STETSON L. REV. 3 (1991) (providing an interesting discussion of the interests which employees, customers, suppliers and other non-shareholders have in corporate decision-making); Clyde W. Summers, Worker Dislocation: Who Bears The Burden? A Comparative Study of Social Values in Five Countries, 70 NOTRE DAME L. REV. 1033 (1995) (comparing the way in which the US, U.K., Germany, Sweden and Japan respond to the problems of instability in employment).
289. Bridget Montgomery, The European Community's Draft Fifth Directive: British Resistance and Community Procedures, 10 COMP. LAB. L. 429 (1989) (discussing the controversy in the European Community revolving around the Fifth Directive). See European Union Update, Common Mkt. Rep. (CCH) ¶700 (Dec. 1996) (indicating that Commissioners Padraig Flynn and Mario Monti have appointed a high level expert group to attempt to break the deadlock on the issue of employee participation and the European Statute).
290. Since the provisions of the Statute follow the Draft Directive, the discussion is limited to the Draft Directive, although it should be kept in mind that there is a companion European Statute. See Breskovski, supra note 7, at 91(discussing the standards of director conduct under the Fifth Directive and explaining the similarity between the Draft Directive and the European Statute).
291. Conard, supra note 253, at 2168 (explaining that the directives are found in a pattern that reflects the order in which national representatives reached consensus on successive points, rather than in any logical order).
292. See CARSWELL & DE SARRAU, supra note 5, at § 4.08 at 4-50 (providing an overview of the Draft Ninth Directive On Links Between Groups and citing A Proposal For A Ninth Directive on Links Between Undertakings and In Particular On Groups (Unpublished) indicating that the latest draft was circulated in 1984 (Doc. No. 111/1639/84)). 267 See CARSWELL & DE SARRAU, supra note 5, at § 4.08 at 4-50.
293. Commission of the European Communities, Completing The Internal Market, White Paper From The Commission To The European Council, at ¶ 144 (Milan, June 28-29, 1985) (providing an overview of the agenda of the European Community including a discussion of the need to unify rules regarding the establishment of branches, mergers, and the protection of intellectual and industrial property).
294. CARSWELL & DE SARRAU, supra note 5, § 4.08 at 4-50 n.3 (citing "Business Guide To EC Initiatives," EC Committee of the American Chamber of Commerce, at 5 (Summer 1992) indicating that the EC Committee noted that the draft would apply to more than 500,000 companies in the community and that the business community was worried about the administrative costs of implementation).
295. 270 CARSWELL & DE SARRAU, supra note 5, § 4.08 at 4-51.
296. Blumberg, supra note 11, at 283 (1990) (emphasizing the inadequacy of the raditional view of the corporate personality in light of modern economic development).
297. The Draft Fifth Directive provides a system of corporate governance and a companion European Company Statute has been drafted along with the Fifth Directive. See The European Company Statute, 1989 O.J. (C 263) 41, 1991 O.J. (C 138) 8 , 1991 O.J. (C 176) 1. See Breskovski, supra note 7, at 81 (providing an excellent discussion of the Draft Fifth Directive).
298. See Blumberg, supra note 11, at 283 (indicating that the predominance of powerful multinational corporate complexes is creating irresistible pressures for the development of new legal concepts to impose more effective social controls than those available under traditional entity law).
299. See Frank H. Easterbrook & Daniel Fischel, Limited Liability and The Corporation, 52 U. CHI. L. REV. 89, 93-101 (1985) (discussing the wide variety of purposes served by limiting the liability of the corporate entity).
300. See Blumberg, supra note 11, at 283.
301. See Blumberg, supra note 11, at 287.
302. See Berle, supra note 12, at 354 (observing that the corporate entity does not always correspond to the actual underlying business enterprise. Berle suggests that when courts pierce the corporate veil between parent and subsidiary companies they are imposing liability upon the enterprise).
303. Easterbrook & Fischel, supra note 274, at 93-94 (discussing the effects of limited liability upon the cost of capital). See Paul Halpern et al., An Economic Analysis of Limited Liability in Corporation Law, 30 U. TORONTO L.J. 117 (1980) (indicating that limited liability is essential for the existence of an organized securities market).
304. Easterbrook & Fischel, supra note 274, at 93-94 (discussing the effects of limited liability upon the cost of capital). See Paul Halpern et al., An Economic Analysis of Limited Liability in Corporation Law, 30 U. TORONTO L.J. 117 (1980) (indicating that limited liability is essential for the existence of an organized securities market).
305. See Landers, supra note 50, at 617 (indicating that the evidence suggests that limited liability was originally designed to facilitate the organization of businesses requiring more capital than was available from a small number of investors).
306. See Landers, supra note 50, at 617.
307. See Robert B. Thompson, Unpacking Limited Liability: Direct and Vicarious Liability of Corporate Participants for Torts of the Enterprise, 47 VAND. L. REV. 1 (1994) (discussing the role of corporate limited liability in tort law. Thompson observes that unlimited liability can affect the market indirectly to the extent that it impacts monitoring of shareholders' investment).
308. See Henry G. Manne, Our Two Corporation Systems: Law and Economics, 53 VA. L. REV. 259, 262 (1967) (discussing the role of limited liability in connection with capital formation).
309. Easterbrook & Fischel, supra note 274, at 99 (discussing the relative monitoring cost of investors).
310. See Easterbrook & Fischel, supra note 274, at 99.
311. Landers, supra note 50, at 621.
312. See Landers, supra note 50, at 622.
313. See Landers, supra note 50, at 621.
314. See Landers, supra note 50, at 591.
315. See AktG §§ 291, 292, 302, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7 (providing for the formation of enterprise agreements whereunder one corporation submits to the direction and control of another corporation, or one corporation agrees to transfer profits to another corporation. Where one corporation agrees to submit to the direction of another corporation or agrees to transfer profits, the other contracting party must compensate for any annual net loss sustained pursuant to AktG. § 302).
316. See AktG §§ 291, 292, 302, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7.
317. See AktG §§ 291, 292, 302, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7.
318. See AktG. § 311, translated in 1 BUSINESS TRANSACTIONS, supra note 42, at app. 7 (requiring that in the absence of a control agreement, the controlling enterprise must compensate the controlled entity where its influence has caused a disadvantage).
319. See Autokran, BGHZ 95, 330, 1986 NJW 188 in which the Bundesgerichtshof held a controlling enterprise liable for the obligations of the dominated companies which were organized as GmbHs.
320. See Thompson, supra note 20, at 1038-39 (indicating that "this empirical study permits us to see the contextual nature of the piercing-the-corporate-veil question").
321. See Thompson, supra note 20, at 1073-74. Thompson stresses that in tort situations, courts should recognize that the common-law presumption of limited liability was developed to address the allocation of risk in bargain, not tort, situations, and that the usual reasons for disregarding the corporate entity do not occur in tort settings. Thompson further points out that in statutory cases, the legislature has changed the corporate law presumption of limited liability and that the focus should not be on the traditional factors for piercing the veil in a bargain setting, but on the extent to which a specific statutory scheme permits or limits a corporate insider's ability to allocate liability or gain a benefit by forming a corporation. He indicates, "Piercing the corporate veil will remain a judicially applied doctrine, but the varying strength of the presumption of waited liability in different contexts should produce a more understandable body of law that has a greater connection to the normative reasons for limited liability." Id.
322. See BEAUFORT, supra note 28, § 2.1522 (indicating that it has sometimes been argued that a general principle is emerging in English and Scottish law that all companies in a group of companies will be treated as a single entity).
323. Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1301(b)(1) (1988).
324. The Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601-9675 (1991).
325. Blumberg, supra note 11, at 290.
326. See Amended Proposal, 1991 O.J. (C 192) 6, art. 2(1)(a).
327. See David S. Bakst, Piercing The Corporate Veil For Environmental Torts in the United States and the European Union: The Case For The Proposed Civil Liability Directive, 19 B.C. INT'L & COMP. L. REV. 323, 345-46 (1996) (providing an overview of environmental torts in the U.S. and the European Community)
328. Id.
329. BEAUFORT, supra note 28, at § 2.1521 (indicating that in the competition law of the European Community a holding company and a subsidiary which does not determine its behavior on the market in an autonomous manner are treated as one economic unit).
330. BEAUFORT, supra note 28, at § 2.1520 (indicating that Articles 85 and 86 of the EC Treaty and Secondary legislation treat the parent and subsidiary as one entity if the subsidiary does not determine its behavior on an autonomous basis).
331. See Bakst, supra note 301, at 343 (describing the two criteria for determining parental control over the subsidiary for purposes of EC competition law as a "structural/managerial" test and a "functional/ operational" test. Under the structural/managerial test control is presumed when the parent holds more than fifty percent of the subsidiary stock, and has the power to appoint representatives to the board of directors. Under the functional/operational test, a parent is deemed to control the subsidiary when the parent actually influences control over the subsidiary on a daily basis).
332. See Bakst, supra note 301, at 343. 307 See supra notes 200-19 and accompanying text (discussing U.K. law).
333. See supra notes 96-169 and accompanying text (discussing German law).
334. 654 P.2d 1092, 1101 (Ore. 1982) (involving a breach of contract).
335. Id.
336. Eric Rasmusen, Judicial Legitimacy As A Repeated Game, 10 J. L. & ECON. 63 (1994) (providing a model for explaining the judiciary's approach to restraining itself through the desire to influence the judges).
337. Id. at 65 observing: The Anglo-American judicial system is unusual in not one but two respects: the independence of judges and the formal importance of precedent, which contrast with the bureaucratic judges and free-standing codes of Continental law. Continental law puts its emphasis not on individual cases but on groups of cases that create a practice. . . . However, case law is of growing importance in civil law countries which are developing case law to interpret the civil codes. For example, in Germany, case law has become particularly important not only with regard to the liability of corporate groups, but also with regard to remedies for shareholder disputes in the context of the private limited liability company, the Gesellschaft mit beschrankter Haftung or GmbH. In settling disputes among shareholders, the German courts have developed two remedies in addition to the dissolution remedy including: 1) the withdrawal remedy or-Austritt and 2) the expulsion remedy or Ausschliebung. Over a seventy year period German Courts have developed these withdrawal and expulsion remedies. See Miller, supra note 6 (analyzing the remedies for shareholder disputes under German, French, and U.K. law); Hugh T. Scogin, Withdrawal and Expulsion in Germany: A Comparative Perspective on the "Close Corporation Problem," 15 MJIL 127, 132-133, 152 n.101 (1993), citing Judgment of Apr. 1, 1953, BGH, 9 Entscheidungen des Bundesgerichtshofs in Zivilsachen, BGHZ 157 (F.R.G.) See 1 BUSINESS TRANSACTIONS, supra note 42, § 23.09, at 23-168 (explaining the withdrawal and exclusion remedies under German law and stating that toe leading cases on these remedies are Supreme Court of the German Reich, decision of August 13, 1942, RGZ 169, 330; Federal Court of Justice decisions of April 1, 1953, BGHZ 9, 157 (F.R.G.); February 5, 1955, BGHZ 16, 317; and February 23, 1981, NJW 1981, 2302 Nuremberg Court of Appeals, decision of April 21, 1970, BB 1970, 1372). 313 Thomas J. Miceli & Metin M. Cosgel, Reputation and Judicial Decision-making, 23 J. ECON. BEHAV. & ORG. 31, 33 (1994) (developing a model of judicial decision-making based upon the judge's concern for reputation. The audience of the judge play a critical role in the model).
338. John C. Coffee, Jr., The Mandatory/Enabling Balance in Corporate Law: An Essay on the Judicial Role, 89 COLUM. L.REV. 1618 (1989) (discussing the role of the judiciary, the extent to which the law provides a core of mandatory fiduciary duties, and the extent to which the court should intervene in matters of corporate governance).
339. See Luis A. Kornhauser, Modelling Collegial Courts I: Path Dependence, 12 INT'L REV. L. & ECON. 169, 171 (1992) (providing an economic analysis of the judicial process).
340. Id.
341. See Thompson, supra note 20, at 1058.
342. See Thompson, supra note 20, at 1068 (indicating that there were only 226 tort cases as compared to 779 contract cases).
343. In the seminal case, Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985) directors of a publicly-held company were held liable for violating their duty of care. The events which followed in the wake of Smith v. Van Gorkom have been characterized as a "race to the bottom." See Thomas L. Hazen, Corporate Directors' Accountability: The Race To The Bottom - The Second Lap, 66 N.C. L. REV. 919 (1989) (discussing the lowering of legal standards of conduct for corporate directors). See also Marc I. Steinberg, The Evisceration of the Duty of Care, 42 S.W. L. REV. 919 (1989). Although the Van Gorkom case itself articulated a relaxed gross negligence standard, many critics believed that the rule as applied in the case was widely regarded as imposing Draconian liability where nusconduct was only slight. The majority of states enacted opt-out provisions which Permit corporations to indemnify directors who have been held liable to third parties. Some statutes, e.g., Delaware, authorize shareholders to adopt a charter provision which reduces or eliminates financial responsibility except for certain cases involving unlawful conduct or breaches of loyalty. See DEL. CODE ANN. tit. 8, § 102(bX7) (West Supp. 1997) (permitting indemnification except for acts or omissions not in good faith or which involve a knowing violation of law, unlawful dividends or stock purchases, and transactions in which the director derives a personal benefit). Other states, such as Florida, Maine, Ohio, Virginia and Wisconsin, eliminate due care liability without requiring charter provisions. See FLA. GEN. CORP. ACT. § 607.1645 (West 1996). New York has adopted a more conservative approach and provides for relatively narrow circumstances in which indemnification may be made. See N.Y. BUS. CORP. L. § 402(b)(1987) (excluding transactions from which an improper benefit is derived).
344. In the seminal case, Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985) directors of a publicly-held company were held liable for violating their duty of care. The events which followed in the wake of Smith v. Van Gorkom have been characterized as a "race to the bottom." See Thomas L. Hazen, Corporate Directors' Accountability: The Race To The Bottom - The Second Lap, 66 N.C. L. REV. 919 (1989) (discussing the lowering of legal standards of conduct for corporate directors). See also Marc I. Steinberg, The Evisceration of the Duty of Care, 42 S.W. L. REV. 919 (1989). Although the Van Gorkom case itself articulated a relaxed gross negligence standard, many critics believed that the rule as applied in the case was widely regarded as imposing Draconian liability where nusconduct was only slight. The majority of states enacted opt-out provisions which Permit corporations to indemnify directors who have been held liable to third parties. Some statutes, e.g., Delaware, authorize shareholders to adopt a charter provision which reduces or eliminates financial responsibility except for certain cases involving unlawful conduct or breaches of loyalty. See DEL. CODE ANN. tit. 8, § 102(bX7) (West Supp. 1997) (permitting indemnification except for acts or omissions not in good faith or which involve a knowing violation of law, unlawful dividends or stock purchases, and transactions in which the director derives a personal benefit). Other states, such as Florida, Maine, Ohio, Virginia and Wisconsin, eliminate due care liability without requiring charter provisions. See FLA. GEN. CORP. ACT. § 607.1645 (West 1996). New York has adopted a more conservative approach and provides for relatively narrow circumstances in which indemnification may be made. See N.Y. BUS. CORP. L. § 402(b)(1987) (excluding transactions from which an improper benefit is derived).
345. In the seminal case, Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985) directors of a publicly-held company were held liable for violating their duty of care. The events which followed in the wake of Smith v. Van Gorkom have been characterized as a "race to the bottom." See Thomas L. Hazen, Corporate Directors' Accountability: The Race To The Bottom - The Second Lap, 66 N.C. L. REV. 919 (1989) (discussing the lowering of legal standards of conduct for corporate directors). See also Marc I. Steinberg, The Evisceration of the Duty of Care, 42 S.W. L. REV. 919 (1989). Although the Van Gorkom case itself articulated a relaxed gross negligence standard, many critics believed that the rule as applied in the case was widely regarded as imposing Draconian liability where nusconduct was only slight. The majority of states enacted opt-out provisions which Permit corporations to indemnify directors who have been held liable to third parties. Some statutes, e.g., Delaware, authorize shareholders to adopt a charter provision which reduces or eliminates financial responsibility except for certain cases involving unlawful conduct or breaches of loyalty. See DEL. CODE ANN. tit. 8, § 102(bX7) (West Supp. 1997) (permitting indemnification except for acts or omissions not in good faith or which involve a knowing violation of law, unlawful dividends or stock purchases, and transactions in which the director derives a personal benefit). Other states, such as Florida, Maine, Ohio, Virginia and Wisconsin, eliminate due care liability without requiring charter provisions. See FLA. GEN. CORP. ACT. § 607.1645 (West 1996). New York has adopted a more conservative approach and provides for relatively narrow circumstances in which indemnification may be made. See N.Y. BUS. CORP. L. § 402(b)(1987) (excluding transactions from which an improper benefit is derived).
346. The Uniform Partnership Act (UPA) (1916) did not directly provide for a duty of care provision. See Donald J. Weidner, Three Policy Decisions Animate Revision of Uniform Partnership Act, 46 BUS.LAW. 427, 459, 462 (1991) (reviewing the standard of care provisions in connection with the revision of the Uniform Partnership Act and indicating that the newly-defined statutory definition of standard of conduct reflects the supremacy of the partnership agreement and desire to minimize mandatory statutory rules among partners). Weidner explains: Vague broad statements of a powerful duty of loyalty cause too much uncertainty. It was suggested that, even if there are no bad holdings, overly broad judicial language has left practitioners uncertain about whether their negotiated agreements will be voided. It was said that attorneys and their clients want to be able to negotiate transactions, reduce their agreements to writing and have some comfort that those agreements will not be undone by "fuzzy" notions of fiduciary duties. Id. at 462. The Revised Uniform Partnership Act expressly limits fiduciary duties to those expressly ennumerated: "The only fiduciary duties a partner owes to the partnership and the other parties are those set forth in the section." See REV.UNIFORM PARTNERSHIP ACT § 404 (1995). Apparently, the decision to define the partner's duties in the statute was an attempt to prevent courts from creating overly-broad judicial decisions concerning standards of conduct. The standards of conduct found in THE REV. UNIFORM PARTNERSHIP ACT (1995) arguably reflect the supremacy of the partnership agreement and the minimization of judicially-imposed mandatory rules among partners. By limiting fiduciary duties to those expressly enumerated, RUPA turns away from broad statements of fiduciary duty which have long been embraced by courts in such decisions as Meinhard v. Salmon, 164 N.B. 545 (N.Y. 1928). § 404 of RUPA provides in part: (a) The only fiduciary duties a partner owes to the partnership and the other partners are the duty of loyalty and the duty of care set forth in this section. (b) A partner's duty of loyalty to the partnership and the other partners is limited to the following: (1) to account to the partnership and hold as trustee for it any property, profit, or benefit derived by the partner in the conduct and winding up of the partnership business or derived from a use or appropriation by the partner of partnership property or opportunity without the consent of the other partners; (2) to refrain from dealing with the partnership in the conduct or winding up of the partnership business, as or on behalf of a party having an interest adverse to the partnership without the consent of the other partners; and (3) to refrain from competing with the partnership in the conduct of the partnership business before the dissolution of the partnership without the consent of the other partners. (c) A partner's duty of loyalty may not be eliminated by agreement, but the partners by agreement may identify specific types or categories of activities that do not violate the duty of loyalty, if not manifestly unreasonable. (d) A partner's duty of care to the partnership and the other partners in the conduct and winding up of the partnership business is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law. (e) A partner shall discharge the duties to the partnership and the other partners under this Act or under the partnership agreement and exercise any rights consistently with the obligation of good faith and fair dealing. The obligation of good faith and fair dealing may not be eliminated in the agreement, but the partners by agreement may determine the standards by which the performance of the obligation is to be measured, if the standards are not manifestly unreasonable . . . . (f) A partner may lend money to and transact other business with the partnership. The rights and obligations of a partner who lends money to or transacts business with the partnership are the same as those of a person who is not a partner, subject to other applicable law. (g) This section applies to a person winding up the partnership business as the personal or legal representative of the last surviving partner as if the person were a partner.
347. A number of courts have been active in protecting the rights of minority shareholders. In the seminal case Donahoe v. Rodd Electrotype Co., 328 N.E.2d 505 (Mass. 1975), a heightened fiduciary duty was imposed upon majority shareholders in a close corporation. The court applied the strict fiduciary duty first recognized among partners in Meinhard v. Salmon, 164 N.E.2d 545 (N.Y. 1928) to participants in the privately-owned corporation. See Wilkes v. Springside Nursing Home, Inc., 353 N.E.2d 657 (Mass. 1967) (involving a minority shareholder whose salary was terminated and who was voted out as officer and director of the company); Jones v. H.F. Ahamanson & Co., 460 P.2d 464 (Cal. App. 1969) (recognizing the special fiduciary duty of the majority shareholders); Comolli v. Comolli, 246 S. 2d 278 (Ga. 1978). See Fought v. Morris, 543 So. 2d 167 (Miss. 1989) (imposing a standard of intrinsic fairness upon the majority shareholders); Crosby v. Beam, 548 N.E.2d 217 (Ohio 1989) (extending a heightened fiduciary duty to shareholders in a private company). One legislative response to the judicial imposition of minority shareholder protections in close corporations has been the enactment of a statute which expressly defers to the shareholder's agreement. See FLA. STAT. ANN. § 607.0732(1) (West 1996) providing: Shareholder Agreements 1) An agreement among the shareholders of a corporation with 100 or fewer shareholders at the time of the agreement, that complies with this section, is effective among the shareholders and the corporation even though it is inconsistent with one or more other provisions of this chapter, if it: a) Eliminates the board of directors or restricts the discretion or powers of the board of directors; b) Governs the authorization or making of distributions whether or not in proportion to ownership of shares subject to the limitations in S. 607.06401; c) Establishes the terms and conditions of any agreement for the transfer or use of property or the provision of services between the corporation and any shareholder, director, officer, or employee of the corporation; d) Governs, in general or in regard to specific matters, the exercise or division of voting power by the shareholders and directors, including use of weighted voting rights or director proxies; e) Establishes the terms and conditions of any agreement for the transfer or use of property or the provision of services between the corporation and any shareholder, director, officer, or employee of the corporation; f) Transfers to any shareholder or other person any authority to exercise the corporate powers to manage the business and affairs of the corporation, including the resolution of any issue about which there exists a deadlock among directors or shareholders; or g) Requires dissolution of the corporation at the request of one or more of the shareholders or upon the occurrence of a specified event or contingency. See Hunter J. Brownlee, The Shareholders' Agreement: A Contractual Alternative To Oppression As A Ground For Dissolution, 24 STET. L. REV. 267 (1994) (discussing the role of the contract in resolving shareholder disputes. Brownlee indicates: Shareholders caught in a squeeze-out or an oppression dilemma usually either want to withdraw their capital from the corporation or alter the balance of power within the corporation itself because of policy disputes. Both of these options can be achieved without judicial dissolution. The most economical alternative is the shareholders' agreement. Shareholders' agreements deter oppressive conduct, reduce shareholder disputes, and decrease litigation). Id. at 295.
348. A number of courts have been active in protecting the rights of minority shareholders. In the seminal case Donahoe v. Rodd Electrotype Co., 328 N.E.2d 505 (Mass. 1975), a heightened fiduciary duty was imposed upon majority shareholders in a close corporation. The court applied the strict fiduciary duty first recognized among partners in Meinhard v. Salmon, 164 N.E.2d 545 (N.Y. 1928) to participants in the privately-owned corporation. See Wilkes v. Springside Nursing Home, Inc., 353 N.E.2d 657 (Mass. 1967) (involving a minority shareholder whose salary was terminated and who was voted out as officer and director of the company); Jones v. H.F. Ahamanson & Co., 460 P.2d 464 (Cal. App. 1969) (recognizing the special fiduciary duty of the majority shareholders); Comolli v. Comolli, 246 S. 2d 278 (Ga. 1978). See Fought v. Morris, 543 So. 2d 167 (Miss. 1989) (imposing a standard of intrinsic fairness upon the majority shareholders); Crosby v. Beam, 548 N.E.2d 217 (Ohio 1989) (extending a heightened fiduciary duty to shareholders in a private company). One legislative response to the judicial imposition of minority shareholder protections in close corporations has been the enactment of a statute which expressly defers to the shareholder's agreement. See FLA. STAT. ANN. § 607.0732(1) (West 1996) providing: Shareholder Agreements 1) An agreement among the shareholders of a corporation with 100 or fewer shareholders at the time of the agreement, that complies with this section, is effective among the shareholders and the corporation even though it is inconsistent with one or more other provisions of this chapter, if it: a) Eliminates the board of directors or restricts the discretion or powers of the board of directors; b) Governs the authorization or making of distributions whether or not in proportion to ownership of shares subject to the limitations in S. 607.06401; c) Establishes the terms and conditions of any agreement for the transfer or use of property or the provision of services between the corporation and any shareholder, director, officer, or employee of the corporation; d) Governs, in general or in regard to specific matters, the exercise or division of voting power by the shareholders and directors, including use of weighted voting rights or director proxies; e) Establishes the terms and conditions of any agreement for the transfer or use of property or the provision of services between the corporation and any shareholder, director, officer, or employee of the corporation; f) Transfers to any shareholder or other person any authority to exercise the corporate powers to manage the business and affairs of the corporation, including the resolution of any issue about which there exists a deadlock among directors or shareholders; or g) Requires dissolution of the corporation at the request of one or more of the shareholders or upon the occurrence of a specified event or contingency. See Hunter J. Brownlee, The Shareholders' Agreement: A Contractual Alternative To Oppression As A Ground For Dissolution, 24 STET. L. REV. 267 (1994) (discussing the role of the contract in resolving shareholder disputes. Brownlee indicates: Shareholders caught in a squeeze-out or an oppression dilemma usually either want to withdraw their capital from the corporation or alter the balance of power within the corporation itself because of policy disputes. Both of these options can be achieved without judicial dissolution. The most economical alternative is the shareholders' agreement. Shareholders' agreements deter oppressive conduct, reduce shareholder disputes, and decrease litigation). Id. at 295.
349. See CARSWELL & DE SARRAU, supra note 5, § 4.03 at 4-11 (discussing the Second Directive and its apparent purpose to protect shareholders and others to coordinate rules concerning formation of the corporation, and the maintenance, increase or reduction in corporate capital).
350. 323 CARSWELL & DESARRAU, supra note 5, § 4.03 at 4-11.
351. CARSWELL & DESARRAU, supra note 5, § 4.03 at 4-11.
352. See Formation of Companies and Preservation of Capital, Safeguards in Formation of Companies, Common Mkt. Rptr. (CCH), ¶1358 at 1125-2 (1996).
353. Italy serves as an excellent example. The Italian limited liability company (societa a responsabilita limitata - S.r.1.) must have minimum capital equal to 20 million lire . See MAISTO & MAISTO, BUSINESS GUIDE To ITALY, 417 (1997) (discussing Italian corporate law and minimum capital requirements including a discussion of C.c. art. 2474, ¶ 1).
354. The First Council Directive 68/151, 11 1968 O.J. (L 65) 8.
355. Id. at Art. 2(1).
356. Id. 330 CARSWELL & DE SARRAU, supra note 5, § 4.02 at 4-6.
357. CARSWELL & DESARRAU, supra note 5, § 4.02 at 4-6.
358. The Fourth Council Directive, 78/660, 1978 O.J. (No. L 22) 11.
359. See CARSWELL & DE SARRAU, supra at note 5 , § 4.04[1] at 4-16 (indicating that the provisions of the Fourth Directive have been updated by a Council Directive). See Council Directive 90/604, 1990 O.J. (No. L317) 57.
360. See Thompson, Piercing the Corporate Veil, supra note 20, at 1058.
361. See Thompson, Unpacking Limited Liability, supra note 281, at 1 (exploring the issue of liability in a tort and contract context, and also discussing liability issues pertaining to the corporate group).
362. See Manne, supra note 282, at 262 (discussing the role of limited liability in connection with capital formation).
363. Thompson, supra note 281, at 1 (observing that when the parent owns all or most of the shares of the subsidiary, no transaction costs will be incurred in pursuing the shareholder's liability. There is no public market for the subsidiary, so there can be no adverse impact on the market for shares. Thompson notes that based on economic factors, the case for limited liability is less persuasive in the parent-subsidiary cases).
364. The business community has expressed concern about the veil-piercing doctrine in a number of contexts. See Christine P. Andres et al., What A CPA Should Know Before A Business Fails, J. ACCT. 34 (1991) (discussing veil-piercing in connection with guarantees, wages, negotiable instruments, and taxes); Milton Bordwin, Piercing The Corporate Veil, 84 MGMT. REV. 37 (1995) (discussing strategies to reduce the likelihood that a court will pierce the corporate veil of limited liability); H. Allan Shore & Sharon Quinn Dixon, Protecting Client Assets, J. ACCT. 77 (1995) (discussing strategies to preserve individual assets).
365. The business community has expressed concern about the veil-piercing doctrine in a number of contexts. See Christine P. Andres et al., What A CPA Should Know Before A Business Fails, J. ACCT. 34 (1991) (discussing veil-piercing in connection with guarantees, wages, negotiable instruments, and taxes); Milton Bordwin, Piercing The Corporate Veil, 84 MGMT. REV. 37 (1995) (discussing strategies to reduce the likelihood that a court will pierce the corporate veil of limited liability); H. Allan Shore & Sharon Quinn Dixon, Protecting Client Assets, J. ACCT. 77 (1995) (discussing strategies to preserve individual assets).
366. The business community has expressed concern about the veil-piercing doctrine in a number of contexts. See Christine P. Andres et al., What A CPA Should Know Before A Business Fails, J. ACCT. 34 (1991) (discussing veil-piercing in connection with guarantees, wages, negotiable instruments, and taxes); Milton Bordwin, Piercing The Corporate Veil, 84 MGMT. REV. 37 (1995) (discussing strategies to reduce the likelihood that a court will pierce the corporate veil of limited liability); H. Allan Shore & Sharon Quinn Dixon, Protecting Client Assets, J. ACCT. 77 (1995) (discussing strategies to preserve individual assets).
367. Coffee, supra note 314, at 1619 (discussing the debate regarding the adoption of opt-out provisions that permit management to contractually limit their duty of care).
368. See Conard , supra note 253, at 2150, 2195, 2199 (1991). Although Conard indicates that the Community coordination program does not exhibit a reliable means of halting the race of laxity, he concludes that whether the Community program can prevent a "race to laxity" remains to be seen.
369. See Landers, supra note 50, at 594 (emphasizing that states impose few protections for creditors); see also MODEL Bus. CORP. ACT ANN. § 6.01 (Supp. 1996) (providing rules for the issuance of stock which fail to include any minimum capitalization rules and Statutory Comparison as of December 31, 1995).
370. See MODEL BUS. CORP. ACT § 6.40 (1997) which prohibits the payment of dividends only where their payment would make the corporation unable to pay its debts in the usual course of business, or where its liabilities would exceed its assets. § 6.40(c) provides: (c) No distributions may be made if, after giving it effect: (1) the corporation would not be able to pay its debts as they become due in the usual course of business; or (2) the corporation's total assets would be less than the sum of its total liabilities plus (unless the articles of incorporation permit otherwise) the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution.
371. See Landers, supra note 50, at 594.
372. See Breskovski, supra note 7, at 88 (providing an excellent discussion of the wrongful trading provisions).
373. See 7 HALSBURY'S STATUTES, ¶ 2113-2114 (1997).
374. For example, there was a perceived need for legislation to permit waivers of specific duties of directors in an effort to reduce the risk of director liability for negligence following the decision in Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985) in which directors were held personally liable for the failure to keep themselves informed of a merger transaction. See Coffee, supra note 314, at 1618 (discussing the debate between "contractarians" who favor the adoption of "opt-out" provisions to permit directors to contractually limit duties of care and their opponents). See also Deborah A. DeMott, Limiting Directors' Liability, 66 WASH. U. L.Q. 295 (1988); Harvey Gelb, Director Due Care Liability: An Assessment of The New Statutes, 61 TEMP. L. REV. 13 (1988) (reviewing legislative efforts to provide corporate directors relief from liability for breach in their duty of care). The desire to minimize a mandatory core of fiduciary duties has also been evident in the revision of the Uniform Partnership Act which seeks to limit the court's discretion to broadly define partnership duties. See discussion of the Revised Uniform Partnerhsip Act, supra notes 317-21 and accompanying text.
375. For example, there was a perceived need for legislation to permit waivers of specific duties of directors in an effort to reduce the risk of director liability for negligence following the decision in Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985) in which directors were held personally liable for the failure to keep themselves informed of a merger transaction. See Coffee, supra note 314, at 1618 (discussing the debate between "contractarians" who favor the adoption of "opt-out" provisions to permit directors to contractually limit duties of care and their opponents). See also Deborah A. DeMott, Limiting Directors' Liability, 66 WASH. U. L.Q. 295 (1988); Harvey Gelb, Director Due Care Liability: An Assessment of The New Statutes, 61 TEMP. L. REV. 13 (1988) (reviewing legislative efforts to provide corporate directors relief from liability for breach in their duty of care). The desire to minimize a mandatory core of fiduciary duties has also been evident in the revision of the Uniform Partnership Act which seeks to limit the court's discretion to broadly define partnership duties. See discussion of the Revised Uniform Partnerhsip Act, supra notes 317-21 and accompanying text.
376. For example, there was a perceived need for legislation to permit waivers of specific duties of directors in an effort to reduce the risk of director liability for negligence following the decision in Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985) in which directors were held personally liable for the failure to keep themselves informed of a merger transaction. See Coffee, supra note 314, at 1618 (discussing the debate between "contractarians" who favor the adoption of "opt-out" provisions to permit directors to contractually limit duties of care and their opponents). See also Deborah A. DeMott, Limiting Directors' Liability, 66 WASH. U. L.Q. 295 (1988); Harvey Gelb, Director Due Care Liability: An Assessment of The New Statutes, 61 TEMP. L. REV. 13 (1988) (reviewing legislative efforts to provide corporate directors relief from liability for breach in their duty of care). The desire to minimize a mandatory core of fiduciary duties has also been evident in the revision of the Uniform Partnership Act which seeks to limit the court's discretion to broadly define partnership duties. See discussion of the Revised Uniform Partnerhsip Act, supra notes 317-21 and accompanying text.
377. See Brandeis dissent in Liggett v. Lee, 288 U.S. 517, 559 (1933).
378. See id. at 559 (explaining that the removal by the leading industrial states of the limitations upon the size and powers of business corporations was driven by a desire to attract business through lower costs).
379. Id.
380. See Conard, supra note 253, at 2195 (discussing the position of the "institutionalists" who favor increased mandatory standards and seek an end to the race of laxity.
381. Conard observes that the objectives of the institutionalists are set forth by William L. Cary, in his seminal article Federalism and Corporate Law: Reflections Upon Delaware, 83 YALE L.J. 663 (1974). These objectives include standards of fiduciary duty and care in conflict situations, increased shareholder participation in corporate decision-making, and restrictions on indemnification of officers and directors).
382. The creation of minimum standards for financial capital as a solution to veil-piercig litigation was considered by Barber, supra note 27, at 395, but was criticized on the grounds that minimum capitalization rules would be inflexible because it would treat all corporations the same. However, minimum capitalization rules need not be inflexible. It is possible to develop different capitalization standards for different industries and/or different types of legal entities such as S Corporations under I.R.C. § 1361(1997), limited liability companies, and C Corporations under Subchapter C of the I.R.C.