Document Type

Article

Publication Title

Ohio State Law Journal

Publication Date

1995

Abstract

Unlimited shareholder liability would radically change the way we look at corporations. In an unlimited-liability world, one part at least of the veil between corporation and shareholder would no longer exist. As a result, the relationship between corporation and shareholder would be, both in law and in fact,much closer than it is currently. The two parts of this change-the legal and the factual-would reinforce each other. The legal change would be reflected in court decisions enforcing unlimited liability Regardless of the exact contours that decisions in this area took initially, there would be at least some shareholders-mutual funds, for example--whom it would be both jurisdictionally and practically feasible for tort creditors to pursue. If only a few unlimited-liability judgments against these shareholders were obtained and enforced, almost all shareholders would examine their corporate investments with a new attention. They would investigate the business activities of the corporations in which they owned shares, and if they believed those activities presented a risk of unlimited liability, they-would bear that risk only for a price. These changes in shareholder behavior would make more apparent and more real-the role of shareholders in influencing corporate behavior, and it would in turn be acknowledged by the courts in an increased willingness to enforce unlimited liability.

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