Remedying abuses of limited liability in company groups

In the modern world, company groups have become a commercial reality. With increasing regulatory and compliance requirements for different industries, larger companies are often more optimally managed in a group structure. The individual companies within a group structure still operate in the economic interest of the group as a whole. Despite this reality, company law has strictly upheld the separate legal personality of individual companies within a group. As a result of this separate legal personality, the holding company of the group cannot be held liable for its subsidiaries obligations. This creates room for abuse, especially since the holding company is able to control which obligations may be incurred by the subsidiaries in the first instance. This paper will discuss some of the abuses and possible unintended consequences of extending separate legal personality and limited liability to companies operating within a group. The author will seek to evaluate the common law remedy for piercing the corporate veil as a possible remedy against these abuses. The statutory remedy for piercing the corporate veil under section 20(9) of the Companies Act will similarly be evaluated. The research will conclude that these remedies do not consider the unique policy and economic realities of company groups and therefore are not adequate to address the abuse which may occur in company groups