At the identical time, courts have acknowledged that the company veil of a company may be pierced to disclaim shareholders the protection that the principle of separate legal entity normally offers. It is noted that there are exceptions underneath the widespread legislation and statutory to lift the veil in relation to torts committed by a bunch company. The main exceptions include cases where an agency relates between a subsidiary and a father or mother company. In the context that a subsidiary acts as an agent, the mere exercise of management over the subsidiary by a parent company will serve as an inadequate ground. Based upon principle of financial effectivity, four reasons justify the doctrine of restricted legal responsibility. Firstly, the restricted liability decreases the need for shareholders to observe the managers of firms they invested in, in order to facilitate the separation of possession and control in large companies. Yet, the company group structure sometimes includes one company investor who controls the decision-making process of its subsidiaries.
In the legal context, the owners of a company are usually known as the “members”. In a company limited or unlimited by shares , this would be the shareholders. Some offshore jurisdictions have … Read MoreContinue Reading