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Article: An Economic Analysis of Limited Shareholder Liability in Contractual Claims

TitleAn Economic Analysis of Limited Shareholder Liability in Contractual Claims
Authors
KeywordsLimited liability
Economic analysis
Piercing of corporate veil
Issue Date2014
PublisherJoe Christensen, Inc. The Journal's web site is located at http://scholarship.law.berkeley.edu/bblj/
Citation
Berkeley Business Law Journal, 2014, v. 11 n. 1, p. 113-181 How to Cite?
AbstractThis Article evaluates the economic basis for limited liability in contractual claims and proposes the introduction of unlimited liability for such claims against closely held corporations. It argues that the existing justifications for limited liability are unconvincing, and that unlimited liability is an economically more efficient rule for these corporations in light of savings in monitoring costs and more efficient allocation of risks. It rejects the frequently made argument that limited liability is justified in contractual claims because the contractual counterparty had a prior opportunity to negotiate for modifications. This argument demonstrates a fundamental misunderstanding of the nature of the bargaining process between a corporation and its various groups of contractual creditors, many of which are simply not in a position to negotiate for modifications to the default rule. It further examines some of the implementation problems for unlimited liability and suggests possible solutions for them.
Persistent Identifierhttp://hdl.handle.net/10722/202317
ISSN
SSRN

 

DC FieldValueLanguage
dc.contributor.authorCheng, TKH-
dc.date.accessioned2014-09-15T02:20:07Z-
dc.date.available2014-09-15T02:20:07Z-
dc.date.issued2014-
dc.identifier.citationBerkeley Business Law Journal, 2014, v. 11 n. 1, p. 113-181-
dc.identifier.issn1548-7067-
dc.identifier.urihttp://hdl.handle.net/10722/202317-
dc.description.abstractThis Article evaluates the economic basis for limited liability in contractual claims and proposes the introduction of unlimited liability for such claims against closely held corporations. It argues that the existing justifications for limited liability are unconvincing, and that unlimited liability is an economically more efficient rule for these corporations in light of savings in monitoring costs and more efficient allocation of risks. It rejects the frequently made argument that limited liability is justified in contractual claims because the contractual counterparty had a prior opportunity to negotiate for modifications. This argument demonstrates a fundamental misunderstanding of the nature of the bargaining process between a corporation and its various groups of contractual creditors, many of which are simply not in a position to negotiate for modifications to the default rule. It further examines some of the implementation problems for unlimited liability and suggests possible solutions for them.-
dc.languageeng-
dc.publisherJoe Christensen, Inc. The Journal's web site is located at http://scholarship.law.berkeley.edu/bblj/-
dc.relation.ispartofBerkeley Business Law Journal-
dc.subjectLimited liability-
dc.subjectEconomic analysis-
dc.subjectPiercing of corporate veil-
dc.titleAn Economic Analysis of Limited Shareholder Liability in Contractual Claimsen_US
dc.typeArticleen_US
dc.identifier.emailCheng, TKH: tkhcheng@hku.hk-
dc.identifier.hkuros246808-
dc.identifier.volume11-
dc.identifier.issue1-
dc.identifier.spage113-
dc.identifier.epage181-
dc.publisher.placeUnited States-
dc.identifier.ssrn2494157-
dc.identifier.hkulrp2014/033-

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