An Exploration into Liability of Corporate Groups: A Comparative Perspective

Abstract

There is no doubt that corporations are the key players in the world and local economies today. The emergence of corporate groups is a phenomenon of these days. Along with the active growth of group corporations, the legal environment was supposed to be established and regulated, but the development of the law has lagged behind. This is a global problem in general.

Although some jurisdictions have taken initiatives to improve corporate group law, this area of the law is still insufficient to regulate corporations efficiently. The issue of corporate groups is not only in respect of corporate law but also intersectional. Thus, group corporations are often incompletely regulated by the laws of their respective sectors. Even in the academic literature, there is still a lack of consensus upon the main aspects of corporate group law. These unresolved issues cannot be resolved without addressing the underlying issue, that is the corporate group’s liability. One of the basic principles of corporate law is the principle of limited liability, originated in the era of a single, solo corporation, however, it is still in force today in the context of polycorporation’s liability.

This research examines the liability of corporate groups in a comparative law perspective. It discusses different ways of imposing corporate liability, reviews the application of fundamental corporate law principles to a group, and examines the relative merits of doctrinal approaches and principles in light of a collection of separate corporations. It also reviews the regulation of corporate groups and cases in various jurisdictions and the extent to which those jurisdictions’ experiences and practice.

Subsidiaries of a group are also difficult to legally regulate because of their complex nature of being independent and dependent, separated and controlled. So, it may also require a dual-mode regulative strategy because of its dual nature. In other words, it would provide for the independence of subsidiaries and parent corporations generally, however, if necessary, this kind of their legal status to be infringed upon sharing responsibility. Historically and theoretically, enterprise liability doctrine proposes to expand the liability of the parent corporation and to hold it accountable on behalf of its affiliated corporations by neglecting the separate personality of a corporation. In this study, I propose a partial enterprise liability approach. This approach is encouraged on the concept of duty of vigilance/due diligence principle which has recently been proposed by international governing bodies and the concept of control which is one of the factors of the enterprise principle. This principle of due diligence is an innovative principle that

has just been introduced into international human rights and environmental law and has been currently adopted in the law of some countries in accordance with national law. The research recommends that corporate groups be regulated by a legal control test in limited areas, namely mass tort, human rights, environment, insolvency and corporate laws.