Jones Day Professorship of Commercial Law Lecture 2023

The concept of corporate legal personality is a legal fiction, which emanated from the desire to simplify complex legal relationships in which the corporation is a counterparty. Merely a means to an end, it may lead to inappropriate, or even unjust, consequences, if strictly applied. The archetypical example of such injustice arises when a controlling shareholder, who has been blatantly ignoring corporate formalities, tries to hide behind the “corporate veil” to avoid corporate creditors. In most jurisdictions, the court deals with this problem by “piercing the corporate veil.” Thus, it is now well-known that although a corporation is a separate legal person, its liabilities may sometimes be imposed on its shareholders – blurring the concept of the corporation as a separate legal person.

The degree to which corporate personality is respected varies considerably depending on the jurisdiction. South Korea, for example, belongs to a group of jurisdictions where corporate personality is strictly observed. In other jurisdictions (e.g., Japan), however, corporate personality tends to be more flexibly interpreted. Reflective loss, which will be the focus of this seminar, provides a useful lens for engaging in a comparative analysis of how and why different countries have upheld the doctrine of separate legal personality. 

In many countries, it is now well established that a shareholder is not allowed to file a direct claim for damages for reflective loss (“the prohibition principle”). A small number of jurisdictions, however, recognize some exceptions to the prohibition principle. Again, the scope of these exceptions varies across countries.

The purpose of this lecture is to reexamine the various rationales advanced for the prohibition principle in the face of an increasing trend toward more flexible interpretations of corporate personality. My argument is that these jurisdictions' adherence to the prohibition principle should be relaxed to facilitate fair and efficient shareholder protection.

For more information, please visit the lecture website.