Duty of Care of Directors and Shareholders' Limited Liability: From the Perspective of Management Liability in Veil-Piercing Cases

Abstract

This study explores the complex interplay between a director's duty of care and a shareholder's limited liability in the context of corporate veil-piercing case law. The research uncovers the recurrent disregard of fiduciary responsibilities as a breach that serves as evidence for the judicial disregard of corporate separateness through an extensive comparative study of major jurisdictions’ legislation. There is, however, a significant divergence of doctrinal approaches within civil law and common law systems; nonetheless, functional convergence coalesces around the prevention of the misuse of a corporate form and the protection of legitimate stakeholder expectations. The study recognises the judges' heightened attention to cases of intentional wrongdoing like fraudulent conveyance or under capitalisation as opposed to negligence and technical breaches, which exhibit more lenient scrutiny. The "dual-role problem" within closely held corporations—where control and ownership intersect—creates personal-corporate boundary challenges. The research develops a balanced governance model that sustains the benefits of limited liability while implementing calibrated accountability to prevent corporate form exploitation. The model is premised on the fact that optimal governance suffers not from undisputed stakeholder supremacy, which advocates absolute governance, but on size, ownership structure, industry, and context.