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The maneuver can be pierced if the plaintiffs prove that the subsidiary was undercapitalized. So, a non-corrupt judge may allow this if the maneuver is genuine
by ClarityJones 4y ago
The maneuver can be pierced if the plaintiffs prove that the subsidiary was undercapitalized.
So, a non-corrupt judge may allow this if the maneuver is genuinely done for accounting / management / etc. reasons and the new subsidiary has sufficient capital to cover the liabilities.
A non-corrupt judge may also "allow" it if the plaintiffs never attempt to pierce the veil in the first place. Like a lizard casting off its tail, this may be enough to appease the lawyers representing the class. With the issue never getting to the judge, the judge never has enough information to disallow it.
- shkkmo 4y ago> the maneuver is genuinely done for accounting / management / etc. reasons What sort of reasons could those be? I don't see any reason for those types of maneuvers besides trying to sidestep some amount of liability.
- ClarityJones 4y agoIf we frame it as a maneuver that's associated with / driven by a major liability, then that sort of begs the question. However, generally, companies may spin brands off for reasons such as: https://www.finra.org/investors/insights/splitting-difference-four-reasons-why-corporations-pursue-spinoffs https://www.finra.org/investors/insights/splitting-differenc... Are these reasons sometimes convenient covers for what is really an attempt to avoid liability? Of course, and probably fairly often.