Limited Liability Regime in Corporate Groups. Towards an enforcement of the Enterprise Liability doctrine in Ecuadorian law
Keywords:
Corporate Group, limited liability, parent company, subsidiary company, control, Enterprise Liability, corporate veil piercingAbstract
The corporate group legislation was for a long time an aspect of scarce development under Ecuadorian law. It was not until the last reform of the Companies Law that Ecuador stopped perceiving corporate groups as a structure based on share ownership and began to analyze them based on assumptions of control, subordination, and possible effects that such structures may have on relations with third-party creditors. Since this is a new regulation in the Ecuadorian legislative scenario, the purpose of this paper is to analyze the nature of the corporate group, with a special emphasis on the arguments that support or reject the need for such structures to benefit from the limited liability principle. Once the advantages and obstacles on the application of limited liability in these structures have been analyzed, it will be argued whether it is necessary to consider the incorporation of a liability regime focused on corporate groups known in Common Law as Enterprise Liability doctrine, as a tool to avoid an abuse of limited liability and to pursue the group as a single structure, instead of distinguishing between shareholders and the company as an independent vehicle. Finally, this paper analyzes Ecuadorian legislation focused on how this liability regime for corporate groups has been developed, emphasizing the need for it to enjoy an independent treatment, and not based on the veil piercing doctrine. This is due to the fact that its application in these cases is insufficient and does not guarantee full liability of the parent company, nor an effective compensation for the affected creditors.
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