Piercing the corporate veil among affiliated companies in the European Community and in the US: A comparative analysis of US, German, and UK veil-piercing approaches

The U.S., Germany, and the U.K. take different approaches to parental liabi lity for subsidiary obligations. In the U.S., the exercise of parental cont rol coupled with some form of fraudulent, illegal, or other improper conduc t can result in a piercing of the subsidiary's corporate veil. In the U.S., veil-piercing frequently occurs in the context of privately-owned corporat ions. It is commonly associated with intentional acts of fraud, but other c onduct of a misleading nature which creates an injustice may trigger veil-p iercing. The U.K. approach is similar to that in the U.S., and U.K. courts appear quite reluctant to pierce the corporate veil. In contrast, German la w provides a statutory scheme for treating the parent and subsidiary as one economic unit in certain circumstances in which the dominated subsidiary i s a German Stock Corporation. A separate body of case law governs the impos ition of parental liability in cases where the dominated company is a priva tely-owned German limited liability company. In spite of differences in vei l-piercing approaches in the three countries, a common theme which emerges is the judicial willingness to intervene to curb an abuse or injustice.