Piercing the Corporate Veil Essay Example | Topics and Well Written Essays - 2750 words

Piercing the Corporate Veil - Essay ExampleThe paper tells that the preparation of limited liability to incorporated companies enhanced investments from a large number of small and large investors. It would non be far from the truth to assert that the growth of the modern economy and industrial festering provoke be attributed to this principle of limited liability. Investors are no longer required to harbour apprehensions regarding their investments and from being held responsible for the liabilities of the company in which they had invested. It has been contended by the majority that the proper military operation and growth of stock markets has been affected by limited liability. Moreover, it has simplified the task of evaluating the assets of companies. Furthermore, limited liability has excised the uncertainties, attempts, and liabilities experienced by investors in the past. Shareholders can oversee the behaviour of their company to a much greater extent than in the past. Modern economic development requires large scale capital inflow. The limited liability effectively ensures the availability of capital from investors. The House of Lords launch the doctrine of corporate personality in Salomon v Salomon. Under this principle, private investors and shareholders of companies were permitted to organise their business, via the corporate ratified form. It also allowed entrepreneurs and institutional investors to monitor their investment strategies. In the absence of the court-ordered form of the company, shareholders and investors were at the risk of being personally held liable to the creditors of the company (Muchlinski, 2010, p. 918). It has been perceived that this doctrine has increased the influence of shareholders and investors in the functioning of the company and in its business strategies. However, the majority of the people have welcomed the doctrine of limited liability, as it eliminates the ingest responsibility of shareholders in the ma nagement of the company (Muchlinski, 2010, p. 918). The process of globalisation has substantially increased business natural action and the operations of multinational corporations (MNC) at the global level. The separation of level-headed form of the company from its shareholders and investors has brought about some(prenominal) jurisdictional problems and the domination of MNCs in business (Muchlinski, 2010, p. 920). These problems have come to the fore due to different legal systems in the world. In addition, the state regulatory mechanisms that pertain to the MNCs differ from each other. The limited liability idea externalises the risk from group of investors. Ultimately, it transforms global legal order into national and sub-national jurisdictions. Thus, the corporate veil has assumed the robe of a jurisdictional veil, and the MNCs are using this veil to limit risk of liability (Muchlinski, 2010, p. 920). Moreover, Jurisdiction has emerged as an important aspect of interna tional commercial transactions. The MNCs have established a parent subsidiary last in international business, which creates ambiguity in determining the appropriate jurisdiction for disputes. The difficulty chiefly arises because the jurisdiction of the parent company and that of its subsidiary are different. Consequently, disputes with a subsidiary cannot be addressed by the legal system of the parent companys host country, in order to determine liability (Muchlinski, 2010, p. 920). InAdams v Cape Industries, a UK based parent company exported asbestos from its mines in South Africa. It had conducted this export via a gross sales subsidiary and thereafter through an