Mariana Pargendler is Professor of Law at Fundação Getulio Vargas School of Law in São Paulo and Global Professor of Law at New York University School of Law. This post is based on her recent paper, forthcoming in the University of Pennsylvania Law Review.
As a legal person or entity, a corporation is the repository of rights and duties in its own name. It is legally separate from its shareholders and managers. Current legal and economic scholarship views asset partitioning—the separation between the assets of the corporation and those of its shareholders—as the essential economic role performed by legal personality. The law also recognizes exceptions to asset partitioning and provides for “departitioning remedies,” of which veil piercing is the most prominent. Through veil piercing, courts overcome the attribute of limited liability to hold shareholders liable for corporate debts in certain circumstances.
This view, however, is incomplete, as I show in a paper entitled Veil Peeking: The Corporation as a Nexus for Regulation, which is forthcoming in the University of Pennsylvania Law Review. First, I identify the provision of regulatory partitioning (the separation between the regulatory spheres of the corporation and its shareholders) as another fundamental function of the corporate form. Second, I show that regulatory partitioning is not absolute. In various areas of law and for different purposes, the law “peeks”—or looks behind the corporate veil—to ascribe legal rights or detriments of shareholders to the corporation.
