Protection of property rights based on the doctrine of piercing the corporate veil in the russian case law
In the Russian justice system, the doctrine of piercing the corporate veil was developed at the case law level and is used to prevent abuse in corporate relationships on the part of those who control a legal entity in detriment to the property rights of the legal entity’s creditors. Since the principle of limited liability is important for Russian civil circulation, it is necessary to identify the relevant grounds for the application of said doctrine and its application criteria. Our objective is to justify not only the need for preservation of the doctrine of piercing the corporate veil in the Russian legal system, but also the development of the doctrine by giving it concrete substance based on generalization of existing case law. The criteria for applying the doctrine of piercing the corporate veil are: monitoring the activities of a legal entity by another entity which can influence commercial companies’ decision making, actually or legally; violations or abuse of rights; existence of a cause-and-effect relationship between a violation or an abuse of rights on the part of the beneficiary and the creditor’s losses; the existence of exceptional circumstances in which it is impossible to protect the creditors’ legitimate interests with other legal measures; and dispute arising from private law relations. The main consequence of applying the doctrine of piercing the corporate veil is the disregard for the corporate entity. Autonomy can manifest in three areas (extension of a party’s debts to the legal entities under its control; acknowledgement that the rights and liabilities are actually vested in the party which managed the legal entity; acknowledgement of the legal entity as a representative of the controlling legal entity).
About the AuthorTikhon Podshivalov
Head of the Private Law Laboratory, South Ural State University
76 Lenin Ave., Chelyabinsk, 454080, Russia
1. Суханов Е.А. Ответственность участников корпорации по ее долгам / Суханов Е.А. Сравнительное корпоративное право [Sukhanov E.A. The Responsibility of the Members of the Corporation for Its Debts in Sukhanov E.A. Comparative Corporate Law] (Moscow: Statut, 2014).
2. Abbasi M.Z. Legal Analysis of Agency Theory: An Inquiry into the Nature of Corporation, 51(6) International Journal of Law and Management 401 (2009).
3. Allen N.B. Reverse Piercing of the Corporate Veil: A Straightforward Path to Justice, 85(3) St. John’s Law Review 1147 (2011).
4. Bainbridge S.M. The Business Judgment Rule as Abstention Doctrine, 57(1) Vanderbilt Law Review 83 (2004).
5. Baxt R.W. The Battle Resumes for a Better Business Judgment Rule, 90(3) Australian Law Journal 167 (2016).
6. Boggio A. Linking Corporate Power to Corporate Structures: An Empirical Analysis, 22(1) Social & Legal Studies 107 (2013).
7. Campbell D. Good Faith and the Ubiquity of the “Relational” Contract, 77(3) Modern Law Review 475 (2014).
8. Carter J.W. & Courtney W. Good Faith in Contracts: Is There an Implied Promise to Act Honestly?, 75(3) Cambridge Law Journal 608 (2016).
9. Cheng T.K. Form and Substance of the Doctrine of Piercing the Corporate Veil, 80(2) Mississippi Law Journal 497 (2010).
10. Cheng T.K. The Corporate Veil Doctrine Revisited: A Comparative Study of the English and the U.S. Corporate Veil Doctrines, 34(2) Boston College International and Comparative Law Review 329 (2011).
11. Dignam A. & Lowry J. Company Law (New York: Oxford University Press, 2009).
12. Dubroff H. The Implied Covenant of Good Faith in Contract Interpretation and Gap-Filling: Reviling a Revered Relic, 80(2) St. John’s Law Review 559 (2006).
13. Feinman J.M. The Duty of Good Faith: A Perspective on Contemporary Contract Law, 66(4) Hastings Law Journal 937 (2015).
14. Fletcher I.F. Insolvency in Private International Law (Oxford: Oxford University Press, 2005).
15. Gower L.C.B. The Principles of Modern Company Law (London: Stevens, 1957).
16. Gray A. Good Faith in Australian Contract Law after Barker, 43(5) Australian Business Law Review 358 (2015).
17. Herman E.S. Corporate Control, Corporate Power (New York: Cambridge University Press, 1981).
18. Hunt C.D.L. Good Faith Performance in Canadian Contract Law, 74(1) Cambridge Law Journal 4 (2015).
19. Kahn-Freund O. Some Reflections on Company Law Reform, 7(1–2) Modern Law Review 54 (1944).
20. Landers J.M. A Unified Approach to Parent, Subsidiary, and Affiliate Questions in Bankruptcy, 42(4) University of Chicago Law Review 589 (1975).
21. Loewenstein M. Veil Piercing to Non-Owners: A Practical and Theoretical Inquiry, 41(3) Seton Hall Law Review 839 (2011).
22. Macey J. & Mitts J. Finding Order in the Morass: The Three Real Justifications for Piercing the Corporate Veil, 100(1) Cornell Law Review 99 (2014).
23. Moore C.R. Obligations in the Shade: The Application of Fiduciary Directors’ Duties to Shadow Directors, 36(2) Legal Studies 326 (2016).
24. O’Connor J.F. Good Faith in English Law (Aldershot: Dartmouth Publishers, 1990).
25. Rakoff T.D. Good Faith in Contract Performance: Market Street Associates Ltd. Partnership v. Frey, 120(5) Harvard Law Review 1187 (2007).
26. Ramsay I.M. & Noakes D.B. Piercing the Corporate Veil in Australia, 19 Company and Securities Law Journal 250 (2001).
27. Rands W.J. Domination of a Subsidiary by a Parent, 32(2) Indiana Law Review 421 (1999).
28. Smith D.G. Piercing the Corporate Veil in Regulated Industries, 4 Brigham Young University Law Review 1165 (2008).
29. Summers R.S. “Good Faith” in General Contract Law and the Sales Provisions of the Uniform Commercial Code, 54(2) Virginia Law Review 195 (1968).
30. Tham C.H. Piercing the Corporate Veil: Searching for Appropriate Choice of Law Rules, 1 Lloyd’s Maritime and Commercial Law Quarterly 22 (2007).
31. Thompson R.B. Piercing the Corporate Veil: An Empirical Study, 76(5) Cornell Law Review 1036 (1991).
32. Vandekerckhove K. Piercing the Corporate Veil, 4(5) European Company Law 191 (2007).
33. Vandekerckhove K. Piercing the Corporate Veil: A Transnational Approach (Alphen aan den Rijn: Wolters Kluwer Law & Business, 2007).
34. Ville S.P. Judging Salomon: Corporate Personality and the Growth of British Capitalism in a Comparative Perspective, 27(2) Federal Law Review 203 (1999).
35. Wormser M.I. Piercing the Veil of Corporate Identity, 12 Columbia Law Review 496 (1912).
For citation: Podshivalov T. Protection of property rights based on the doctrine of piercing the corporate veil in the russian case law. Russian Law Journal. 2018;6(2):39-72. https://doi.org/10.17589/2309-8678-2018-6-2-39-72
- There are currently no refbacks.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 4.0.