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Limited liability and multinational enterprises: a case for reform?

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  • Peter Muchlinski

Abstract

In the context of corporate groups, the legal principles of limited liability and corporate separation can lead to injustice in cases of harm to involuntary creditors by externalising risks that ought to be internalised by the enterprise as the better risk taker. The avoidance of responsibility can be achieved by interposing a separate legal entity between the victims and the ultimate controller of the group, be it a parent company or its controlling shareholders. The resulting lack of legal responsibility could be remedied in a number of ways ranging from adaptations of existing exceptions to the doctrine of limited liability to outright abolition of limited liability. Preference is given to a statutory principle of enterprise liability for the controlling entity. The implications of these doctrines are also discussed in relation to the choice of jurisdiction in which to bring a legal action. Copyright The Author 2010. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.

Suggested Citation

  • Peter Muchlinski, 2010. "Limited liability and multinational enterprises: a case for reform?," Cambridge Journal of Economics, Oxford University Press, vol. 34(5), pages 915-928.
  • Handle: RePEc:oup:cambje:v:34:y:2010:i:5:p:915-928
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    File URL: http://hdl.handle.net/10.1093/cje/beq023
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    Cited by:

    1. Stephanie Blankenburg, 2012. "Limited liability," Chapters,in: Handbook of Critical Issues in Finance, chapter 27, pages i-ii Edward Elgar Publishing.

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