Collapsing Corporate Structures: Resolving the Tension Between Form and Substance

摘要

When is a corporate structure legitimate, and when should it be collapsed? Although most urgent in the context of structured finance transactions, this question also arises in other important corporate contexts, including piercing the corporate veil, substantive consolidation, recharacterizing sales as transfers intended for security, and collapsing LBO transactions. In a larger sense, it is one of the most fundamental questions in corporation law, at the basis of any finding that the private ordering of a firm, or of the relationship between firms, is unenforceable or that the law should disrespect form in favor of substance. In the past, judges and scholars have attempted to formulate rules for determining when to collapse corporate structures only in isolated contexts. This Article first examines and synthesizes these isolated sources of law. The synthesis reveals that judges implicitly have been grappling with one of the most difficult conceptual problems of contract law: the circumstances under which externalities should defeat contract enforcement. By addressing that problem directly through contract theory and economics, this Article proposes an overall theory for collapsing corporate structures and then uses that theory to derive rules of general application. Finally, the Article examines how this theory and its derivative rules might inform, or be informed by, the related debate over whether limited liability should be the default rule in corporation law.