Contact: Cees de Groot
In many cases, a legal person does not function as a stand-alone unit, but is part of a group. Groups can be found in both the private and semi-public sectors of the economy. Groups have an internal group structure that enables them operate. However, a group as such does not have legal personality. This means that as concerns relations with third parties, rights, obligations and liabilities are not connected to the groups as a whole, but to the individual entities that form the group. This leads to an inherent tension. Whereas third partied may regards a group as one entity that is only for internal proposes built up of several legal persons, in reality only the constituent parts of the group have legal standing.
This research stream will investigate to what extent the internal governance of the group may have an effect on the external liability of the group members (and also their directors), both in cases where group members have voluntarily accepted liability for the obligations of other group members and in cases where group members have declined to accept liability for the obligations of other group members but an effort is made ‘to pierce the corporate veil’.
Corporate groups (and groups that are built up of other legal persons than corporations, e.g. foundations or associations) are an important element in today’s economy. A group may consist of just two corporations, but can also consist of well over a thousand corporations. Groups pose several questions that are addressed by this research project. It aims at investigating the way in which groups are governed internally and the consequences that failure to set up proper group governance may have in terms of accountability and liability. Liabilities could include liability of a parent company for the debts of its subsidiary companies or liability of the directors of a parent company for failure to install sound group governance.