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What do you suggest instead? The possibility to bankrupt a company without losing more than you put into the venture is in my eyes a feature of capitalism, not

What do you suggest instead? The possibility to bankrupt a company without losing more than you put into the venture is in my eyes a feature of capitalism, not a bug.

NeedMoreTea 7y ago
It's a feature when it's good faith efforts. It's very clearly a bug when it's used to evade no end of abuse, illegality and fraud, or to avoid paying the pollution cleanup. There probably needs to be some exceptional way in law to pierce the shell of limited liability and go after officers, perhaps even claw back from investors and shareholders.
- cies 7y ago
  see my sibling comment
- tomp 7y ago
  Limited liability only protects the capital of the shareholders, it doesn't protect the management of the company against criminal prosecution. (In practice, however, managers are only rarely put in jail, both because it's notoriously difficult to prove white-collar crime (except in few cases, like insider trading, which are the pursued with extra vigor), and because CEOs are generally rich and well connected... but the problem there is corruption, not some inherent feature/bug of the idea of limited liability company.)
  - NeedMoreTea 7y ago
    Perhaps I could have expressed it better. I meant to go for the financials. There are countless cases where the factory or mine has declined and instead of cleaning it up, as promised, they shutter the company. Then there's the countless cases where the company is doing something illegal. Take the proceeds back. We take money earned from theft and drug dealing, we take the stolen car from the person who innocently bought it. There's an offence of receiving stolen property. We don't take the millions from the execs who made millions pushing pharmaceuticals illegally, or the nuclear plant CEO and shareholder that has now, by dint of closure, given the job of decommissioning to the state - i.e. all of us. Once in a blue moon there's a criminal prosecution, but they just about always manage to stay wealthy. We need to rethink the limits of limited liability as it's become a convenient shield to hide all sorts of unethical, shitty and outright illegal behaviour behind.
    - michaelt 7y ago
      I have always thought there should be a law that funds for things like mine clearup and pensions should be paid as the debt is incurred, and locked up so there's no way for the company to get at it.
  - cies 7y ago
    Comparing a PtLd to a "personal business" the PtLd shields the owners from criminal liability for crimes committed by the PtLd, while the "personal biz" provides no such protection. > Limited liability only protects the capital of the shareholders, No, it also protects shareholders from crimes the PtLd commits in order to "serve them". This is a main problem with PtLds imho.
smhost 7y ago
i thought limited liabilites are a recent invention associated with neoliberalization of the 80s.
- filleokus 7y ago
  They have been a thing here in Sweden since the mid 1800's, and probably even earlier elsewhere.
cies 7y ago
i suggest that, when a PtLd or publicly traded company gets under criminal investigation, that all trade in shares gets suspended. when a fine/settlement is determined the trade is resumed but the fine is --for the part that cannot be paid in cash-- paid in equity while considering an adjusted valuation (post fine) of the company. This means the shareholders dilute to pay the fine/settlement. 1) the fine needs to be fair to the society (often we see these "slap on the wrist" fines for big corps, that's just disgusting and shows how much our democracies are disfunctional) 2) i suggest this because i want the shareholders to be pushing their companies to ethical behavior. 3) it is very important that companies are also held liable for unethical behavior in other countries, and/or even for unethical behavior of subsidiaries (the foxcons and the likes).
- tomp 7y ago
  The company is going bankrupt, so the effective "fine" to the shareholders is 100% of their equity. That's the point - "limited liability" just means it can't be more than 100% of equity.
  - cies 7y ago
    Good point. I should have added: 4) When the fine is larger than the company's worth, collect it from the shareholders.
    - tomp 7y ago
      Then noone would invest. Don't forget that often "shareholders" are index funds, pensioners, school endowments... No, the correct solution already exists - the criminal justice system going after criminals that did crime - it just doesn't work very well (especially when criminals are rich - e.g. Epstein - no need for "limited liability company").
      - cies 7y ago
        there are so many ways a huge corp can commit crimes while individuals can all use the "plausible deniability" card. also often the crime is committed by the company as a whole, while no individual did something wrong. > Then noone would invest. i disagree, you just only invest in ethically sound endeavours. and thats exactly what im trying to achieve by my suggestions. starve bad-business from investment and/or people willing to take ownership. and make investors also do dilligence on the ethical side, instead of only an assessment of books+team+product+market.

What do you suggest instead? The possibility to bankrupt a company without losing more than you put into the venture is in my eyes a feature of capitalism, not a bug.

NeedMoreTea 7y ago

It's a feature when it's good faith efforts. It's very clearly a bug when it's used to evade no end of abuse, illegality and fraud, or to avoid paying the pollution cleanup. There probably needs to be some exceptional way in law to pierce the shell of limited liability and go after officers, perhaps even claw back from investors and shareholders.

cies 7y ago
see my sibling comment
tomp 7y ago
Limited liability only protects the capital of the shareholders, it doesn't protect the management of the company against criminal prosecution. (In practice, however, managers are only rarely put in jail, both because it's notoriously difficult to prove white-collar crime (except in few cases, like insider trading, which are the pursued with extra vigor), and because CEOs are generally rich and well connected... but the problem there is corruption, not some inherent feature/bug of the idea of limited liability company.)
- NeedMoreTea 7y ago
  Perhaps I could have expressed it better. I meant to go for the financials. There are countless cases where the factory or mine has declined and instead of cleaning it up, as promised, they shutter the company. Then there's the countless cases where the company is doing something illegal. Take the proceeds back. We take money earned from theft and drug dealing, we take the stolen car from the person who innocently bought it. There's an offence of receiving stolen property. We don't take the millions from the execs who made millions pushing pharmaceuticals illegally, or the nuclear plant CEO and shareholder that has now, by dint of closure, given the job of decommissioning to the state - i.e. all of us. Once in a blue moon there's a criminal prosecution, but they just about always manage to stay wealthy. We need to rethink the limits of limited liability as it's become a convenient shield to hide all sorts of unethical, shitty and outright illegal behaviour behind.
  - michaelt 7y ago
    I have always thought there should be a law that funds for things like mine clearup and pensions should be paid as the debt is incurred, and locked up so there's no way for the company to get at it.
- cies 7y ago
  Comparing a PtLd to a "personal business" the PtLd shields the owners from criminal liability for crimes committed by the PtLd, while the "personal biz" provides no such protection. > Limited liability only protects the capital of the shareholders, No, it also protects shareholders from crimes the PtLd commits in order to "serve them". This is a main problem with PtLds imho.

smhost 7y ago

i thought limited liabilites are a recent invention associated with neoliberalization of the 80s.

filleokus 7y ago
They have been a thing here in Sweden since the mid 1800's, and probably even earlier elsewhere.

cies 7y ago

i suggest that, when a PtLd or publicly traded company gets under criminal investigation, that all trade in shares gets suspended. when a fine/settlement is determined the trade is resumed but the fine is --for the part that cannot be paid in cash-- paid in equity while considering an adjusted valuation (post fine) of the company. This means the shareholders dilute to pay the fine/settlement. 1) the fine needs to be fair to the society (often we see these "slap on the wrist" fines for big corps, that's just disgusting and shows how much our democracies are disfunctional) 2) i suggest this because i want the shareholders to be pushing their companies to ethical behavior. 3) it is very important that companies are also held liable for unethical behavior in other countries, and/or even for unethical behavior of subsidiaries (the foxcons and the likes).

tomp 7y ago
The company is going bankrupt, so the effective "fine" to the shareholders is 100% of their equity. That's the point - "limited liability" just means it can't be more than 100% of equity.
- cies 7y ago
  Good point. I should have added: 4) When the fine is larger than the company's worth, collect it from the shareholders.
  - tomp 7y ago
    Then noone would invest. Don't forget that often "shareholders" are index funds, pensioners, school endowments... No, the correct solution already exists - the criminal justice system going after criminals that did crime - it just doesn't work very well (especially when criminals are rich - e.g. Epstein - no need for "limited liability company").
    - cies 7y ago
      there are so many ways a huge corp can commit crimes while individuals can all use the "plausible deniability" card. also often the crime is committed by the company as a whole, while no individual did something wrong. > Then noone would invest. i disagree, you just only invest in ethically sound endeavours. and thats exactly what im trying to achieve by my suggestions. starve bad-business from investment and/or people willing to take ownership. and make investors also do dilligence on the ethical side, instead of only an assessment of books+team+product+market.