Legal-economic Analysis of the Limited Liability Corporation

This paper is concerned with an analysis of the concept of liability rules governing corporations. What is sought to be undertaken is not a study of the liability rules transcribed within a corporation or company law of any particular country. Instead, the aim is to engage with the concept of liability laws for corporations, following the tenets laid down by an economic analysis approach to law –and in the process of doing so, engaging with some of the assumptions of the economic approaches themselves, in the context of liability laws for corporations.

This is especially important in the present context of the Global Financial Crisis whose tremors we continue to experience, as the issue of limited liability of erstwhile ‘merchant banks’ has assumed volatile proportions in the aftermath of the Global Financial Crisis (Cole 2013). It is important to account for this to interrogate the economic context of limited liability laws.