Regulatory Partitioning as a Key Function of Corporate Personality

Elizabeth Pollman and Robert B. Thompson, eds., Research Handbook on Corporate Purpose and Personhood (Edward Elgar, Forthcoming 2021)

NYU Law and Economics Research Paper No. 20-59

21 Pages Posted: 30 Dec 2020 Last revised: 24 Feb 2021

See all articles by Mariana Pargendler

Mariana Pargendler

Fundação Getulio Vargas Law School at São Paulo; New York University School of Law; European Corporate Governance Institute

Date Written: October 27, 2020

Abstract

Corporate personality entails the separation between the legal spheres of the entity and its shareholders. This chapter highlights the critical economic role of what I call regulatory partitioning, which is the distinction between the entity and its members for purposes of the imputation of legal rights and duties. By enabling the corporation to operate as a “nexus for regulation,” regulatory partitioning produces significant benefits as well as costs. While regulatory partitioning is essential to the proper functioning of multi-member firms, it also supports legal arbitrage in tax and regulatory matters as a major driving force of incorporations around the world. The chapter also distinguishes between the frequently invoked notion of veil piercing as an exception to asset partitioning and a much more pervasive process I call veil peeking as an exception to regulatory partitioning.

Keywords: corporate personality, regulatory partitioning, asset partitioning, veil peeking, veil piercing, nexus for regulation

JEL Classification: K20, K22

Suggested Citation

Pargendler, Mariana, Regulatory Partitioning as a Key Function of Corporate Personality (October 27, 2020). Elizabeth Pollman and Robert B. Thompson, eds., Research Handbook on Corporate Purpose and Personhood (Edward Elgar, Forthcoming 2021), NYU Law and Economics Research Paper No. 20-59, Available at SSRN: https://ssrn.com/abstract=3719913

Mariana Pargendler (Contact Author)

Fundação Getulio Vargas Law School at São Paulo ( email )

R. Rocha, 233, Bela Vista
São Paulo, 01330-000
Brazil

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

European Corporate Governance Institute ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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