The Modern Law of Corporate Groups: An Empirical Study of Piercing the Corporate Veil in the Parent-Subsidiary Context

66 Pages Posted: 26 Jun 2011 Last revised: 30 Jul 2011

See all articles by John H. Matheson

John H. Matheson

University of Minnesota Law School

Date Written: January 1, 2008


Today, massive corporations – both national and international – dominate financial and commercial activities, exercising enormous economic power. The standard organizational structure for these businesses has a parent corporation as the sole shareholder of multiple, separately incorporated operating subsidiaries (or layers of subsidiaries) in a corporate group.

One particular application of the law of corporate groups entails dealing with the ramifications of subsidiary insolvency. Given the massive financial assets of many multinational parent corporations, actions to ignore the legal separateness of a corporate subsidiary of a parent company offer some of the biggest potential payoffs for claimants. In today's global economic world, the primary impact of piercing theory and application comes in the context of these corporate groups.

Empirical analysis treating the application of substantive piercing doctrine to the parent-subsidiary context is virtually nonexistent. This Article begins to fill that void. The underlying project is an empirical analysis of piercing the corporate veil in the parent-subsidiary context. The Article's first objective is to describe statistically the propensities of modern courts for piercing the corporate veil in the parent-subsidiary situation. Its second objective is to use advanced statistical techniques to explore potential causal relationships regarding piercing the veil in the parent-subsidiary context. Both of these objectives are unique to this study. The hope is that courts, commentators, and practitioners may be better equipped to understand and predict under what circumstances a court is likely to exercise its equitable discretion and hold a parent company liable.

Some of the empirical results of this study, even on a descriptive level, are startling. Among the statistically significant findings are:

* Courts seldom pierce the subsidiary's corporate veil and do so much less often than in the overall universe of piercing cases, including the classic case of a small business with one or a few individual owners.

* Appellate courts pierce approximately twice as often as trial courts.

* Entity plaintiffs are more than twice as likely as individual plaintiffs to successfully pierce the subsidiary's veil.

* Courts are three times more likely to pierce in a contract case than in a tort case.

Suggested Citation

Matheson, John H., The Modern Law of Corporate Groups: An Empirical Study of Piercing the Corporate Veil in the Parent-Subsidiary Context (January 1, 2008). North Carolina Law Review, Vol. 87, p. 1091, 2008-2009, Available at SSRN:

John H. Matheson (Contact Author)

University of Minnesota Law School ( email )

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Minneapolis, MN 55455
United States
612-625-3879 (Phone)

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