Some thoughts about the limited liability from a law & economics perspective

AutorIgnacio L. Triolo
Triolo, Some thoughts about the limited liability from a law & economics 1
Some thoughts about the limited liability
from a law & economics perspective*
By Ignacio L. Triolo
1. Introduction
By means of this short paper, our proposal is to find out if corporations have li-
mited liability in all situations or if some exceptions should be made in any given ca-
ses or situations.
First of all, we are going to describe the general concepts applicable to limited
liability and its rationale. Then we will explain the grounds under the piercing of the
corporate veil doctrine. We will also make a brief reference to the liability from a civil
law point of view. Finally, we are going to describe some problems that we think that
limited liability faces and will make some proposals in order to try to solve them.
2. The rationale of limited liability
The majority of the authors say that limited liability is the distinguishing aspect
of corporate law.
Corporations do not have limited liability. They must comply with all of their obli-
gations. Limited liability means that shareholders of a corporation are not personally
liable for debts incurred or torts committed by the firm. This means that if the compa-
ny fails, shareholders’ losses will be limited to the amount that they invested in the
company1.
In that sense, article 163 of the Argentine Companies Law 19.550 (hereinafter
the “ACL”), provides for corporations (“Sociedad anónima”) that “The corporate capital
shall be evidenced by shares of stock and the liabilities of the shareholders shall be
limited to the payment of the shares subscribed by them”.
Please note that under Argentine Law, a foreign corporation may carry out its
business on an on-going basis in Argentina either through a subsidiary or a branch.
Pursuant to the ACL, a corporation is formed by at least two shareholders (ei-
ther individuals or companies). Said minimum must be maintained during the life of
the company.
The legal capacity of a corporation is limited to the fulfillment of its corporate
purpose, therefore, the purpose of a corporation must be concise and determined.
There is a minimum amount of capital required (AR$ 12,000 approximately
equivalent to US$ 4,000). Under the ACL, when referring to capital, the concept of
corporate capital is the same as the concept of subscribed capital. Notwithstanding
* Recommended bibliography.
1 Bainbridge, Stephen M., Corporation law and economics, chapter 4, “Limited liability”.

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