THE DOCTRINE OF DEFECTIVE INCORPORATION AND ITS TENUOUS COEXISTENCE WITH THE MODEL BUSINESS CORPORATION ACT

One of the most important characteristics of a corporation is its limited-liability status. Recent years have seen the rise of noncorporate entities that can also be granted limited liability. However, even before the appearance of these other organizations, limited liability could extend to entitie...

Full description

Saved in:
Bibliographic Details
Published in:Wake Forest law review 2009-10, Vol.44 (3), p.833
Main Author: Wyatt, Timothy R
Format: Article
Language:English
Subjects:
Commercial law
Criticism
Federal legislation
Liability
Limited liability companies
Regression analysis
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:One of the most important characteristics of a corporation is its limited-liability status. Recent years have seen the rise of noncorporate entities that can also be granted limited liability. However, even before the appearance of these other organizations, limited liability could extend to entities that were not formally incorporated. An empirical study of defective-incorporation cases conducted in 1952 concluded that the doctrine was applied inconsistently and that the courts rarely provided "either real reasons or good reasons" for granting limited liability or imposing personal liability, and therefore that it was "not possible to foretell with assurance" whether the courts would grant limited liability in any given case. The study concluded that the defective-incorporation doctrine "ought to be abandoned" and suggested that increasing adoption of the Model Business Corporation Act ("MBCA") was already, minimizing the area of defective incorporation so that the doctrine's elimination was foreseeable.
ISSN:0043-003X