LIABILITY OF MEMBERS FOR COMPANY OBLIGATIONS IN CASE ABUSES OF THE PRIVILEGE OF LIMITED LIABILITY

  • Strahinja Miljković University of Priština in Kosovska Mitrovica, Faculty of Law
Keywords: : piercing the corporate veil, company, responsibility of members, shareholder, misuse of the right, criminal liability of individual persons

Abstract

The principle of limited liability - limited liability for the company’s obligations represents the fundamentals of the operations of modern capital companies. Nevertheless, in circumstances where globalization of the market of goods and services gets more and more important, there is room for the circumvention of the law, especially in the area of ​​abuse of the principle of limited liability for company’s obligations. The issue of piercing the corporate veil is an exception to the principle that the members of the company are not liable to the companyʼs obligations, i.e. to respond only to the amount of the amount entered into the company. The purpose and goal of establishing this institute is primarily to prevent various forms of abuse in the business of companies. Piercing the corporate veil exists in all those cases when the limited partner, a member of a limited liability company and a shareholder, as well as the legal representative of that person if he is a legally incapable natural person, abuses the rule on limited liability for the companyʼs obligations. Мisuse of the right exists when the following persons: 1) use the company to achieve a goal that is otherwise prohibited to them; 2) use the companyʼs property or dispose of it as if it were their personal property; 3) use the company or its property in order to harm the company's creditors and 4) in order to gain benefits for themselves or third parties reduce the companyʼs property, even though they knew or had to know that the company will not be able to perform its obligations. The author will investigate the extent to which the institution of piercing the corporate veil and criminal liability of individual persons is normatively regulated within the national framework and the scope of case law.

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Case law
1. Prest v Petrodel Resources Ltd & Ors [2013] UKSC 34 - https://www.supremecourt.uk/cases/docs/uksc-2013-0004-judgment.pdf
2. VTB Capital Plc v Nutritek International Corp and others [2013] UKSC 5 - https://www.supremecourt.uk/cases/uksc-2012-0167.html
3. Perpetual Real Estate Servs. Inc. v. Michaelson Props., Inc. - 974 F.2d 545 (4th Cir. 1992) - https://www.lexisnexis.com/community/casebrief/p/casebrief-perpetual-real-estate-servs-inc-v-michaelson-props-inc
4. Berkey v. Third Avenue R. Co., 244 N.Y. 84, 155 N.E. 58 (1926) - https://www.courtlistener.com/opinion/3625415/berkey-v-third-avenue-railway-co/authorities/?
5. Salomon v Salomon & Co Ltd [1896] UKHL 1 (16 November 1896) - https://www.bailii.org/uk/cases/UKHL/1896/1.html
6. Booth v. Bunce, 33 N.Y. 139 (1865) - https://cite.case.law/ny/33/139/
Published
2021-11-26
Section
Social, Economic and Political Flows of Crime