Avoid Automatic Piercing: A Comment on Blumberg and Strasser

Nicholas L. Georgakopoulos
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Nicholas L. Georgakopoulos: Indiana University School of Law - Indianapolis

Accounting, Economics, and Law, 2011, vol. 1, issue 1, pages 12

Abstract:

This comment argues against piercing by default, a regime that the arguments of the main piece do not justify. Piercing of subsidiaries’ veil in contract law is justified but under exceptional circumstances and presumed piercing would not cover all of them. Legislatures, courts, and agencies have moved to validate rather than undermine limited liability. Moreover, automatic piercing would erode the socially desirable incentive for business creation that limited liability provides, reduce or eliminate the markets for venture capital, buyouts and corporate control, and preclude the flexible financing that limited liability makes possible.

Keywords: corporate law and economics; enterprise groups (search for similar items in EconPapers)
JEL-codes: K22 K40 (search for similar items in EconPapers)
Date: 2011
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