Ownership Piercing

44 Pages Posted: 24 Feb 2021 Last revised: 1 Apr 2021

See all articles by Lécia Vicente

Lécia Vicente

Louisiana State University, Baton Rouge - Paul M. Hebert Law Center

Date Written: February 21, 2021

Abstract

In this article, I develop the concept of "ownership piercing." I use the expression to suggest that courts engage in a process of evaluative reasoning to clarify who owns property rights and controls the limited liability company. I show under what circumstances courts should do that. Ownership piercing entails investigating the reality of the company's governance and tracing the real ownership profile of the company. It means defining who materially controls the company (i.e., managers or members?) and how "tamed" or, in other words, restricted the members' property rights are considering the consensual agreements the members and other stakeholders entered into. The idea that there may be situations in which courts should ownership pierce rests on the substance over form principle, which maintains that the economic substance of transactions rather than their legal form be disclosed.

Keywords: ownership piercing, limited liability companies, property rights, legal pleiotropy, operating agreement, contract governance

JEL Classification: K12, K22, L21, L22, L24, L25

Suggested Citation

Vicente, Lécia, Ownership Piercing (February 21, 2021). Available at SSRN: https://ssrn.com/abstract=3790108 or http://dx.doi.org/10.2139/ssrn.3790108

Lécia Vicente (Contact Author)

Louisiana State University, Baton Rouge - Paul M. Hebert Law Center ( email )

1 E Campus Dr
Baton Rouge, LA 70803
United States

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