New Publication: Review Essay by Professor Thilo Kuntz on Bainbridge/Henderson, Limited Liability

Published in the European Business Organization Law Review (EBOR)


One of the core features of modern corporate law is affirmative and
defensive partitioning of the corporation’s assets and the shareholders’ (private) assets. Defensive asset partitioning contains the rule of limited liability. What makes it special is that it may not be created by contract—or only under severe restrictions.

Courts in many jurisdictions curtail this rule by doctrines such as ‘piercing the
corporate veil’, exposing shareholders to a creditor’s claim and therefore to personal liability for the corporation’s debts. The circumstances giving cause to such measures are not clear, however. Additionally, in historical perspective, combining business entities with defensive asset partitioning is not a self-evident maneuver; even modern scholars challenge the idea of limiting liability in general, at least visa`-vis tort creditors. Stephen Bainbridge and M. Todd Henderson thus take up an important and timely topic with their book on limited liability and veil piercing.

Considering the wide variety of aspects they discuss, their book provides a welcome chance not just to write a short review, but to take up some general issues of asset partitioning and veil piercing. After providing a historical perspective on limited liability the review essay turns to its relationship with incorporation. It then deals with the question why limited liability should be accepted at all, thus preparing the stage for a look at alternative approaches.

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