Re: limited liability
In practice, small corporations usually cannot get loans without the major stockholder personally guaranteeing the loans, so in those cases limited liability serves mostly to protect the owner(s) from liability to tort victims. Why that should be so I'm not sure. David A lender is also protected from tort damages, and should be, because he is not in charge of the business but only lending funds. If one agrees that lenders should not be liable to tort claims, then it follows that stockholders may also be free of liability, since they can be considered legally as lenders who get a return from a share of profits. The benefit is that the corporation is able to assemble a greater amount of lender-investors. Fred Foldvary = [EMAIL PROTECTED]
Re: limited liability
In a message dated 12/18/02 9:19:28 AM, [EMAIL PROTECTED] writes: In practice, small corporations usually cannot get loans without the major stockholder personally guaranteeing the loans, so in those cases limited liability serves mostly to protect the owner(s) from liability to tort victims. Why that should be so I'm not sure. David A lender is also protected from tort damages, and should be, because he is not in charge of the business but only lending funds. If one agrees that lenders should not be liable to tort claims, then it follows that stockholders may also be free of liability, since they can be considered legally as lenders who get a return from a share of profits. The benefit is that the corporation is able to assemble a greater amount of lender-investors. Fred Foldvary If people want to be lenders they make loans. A sharehold buys and owns. Owners shouldn't be allowed to unilaterally abrogate the tort rights of everyone else. David
Re: limited liability
If one agrees that lenders should not be liable to tort claims, then it follows that stockholders may also be free of liability, since they can be considered legally as lenders who get a return from a share of profits. Fred Foldvary If people want to be lenders they make loans. A sharehold buys and owns. Owners shouldn't be allowed to unilaterally abrogate the tort rights of everyone else. David Perhaps the ideal structure would be two classes of investors: 1) limited-liability bondholders, with dividends per bond equal to that of owners of common shares, and no voting rights. 2) unlimited liability shareholders, with voting rights. Which do you think would have a higher market value? Fred Foldvary = [EMAIL PROTECTED]
Re: limited liability
In a message dated 12/18/02 1:09:04 PM, [EMAIL PROTECTED] writes: Perhaps the ideal structure would be two classes of investors: 1) limited-liability bondholders, with dividends per bond equal to that of owners of common shares, and no voting rights. 2) unlimited liability shareholders, with voting rights. Which do you think would have a higher market value? Fred Foldvary In practice larger corporations offer a wide variety of intermediate investment options. In particular some offer shares of preferred stock. Generally speaking preferred stock offers a guaranteed dividend, calculated as a percentage of face like a bond, but oftentimes payable only out of net income yet ahead of common stock. Thus the preferred element refers to getting paid in preference to common stock. Sometimes preferred stock votes, although not always equally with common stock, and preferred stock typically has no claim to residual income. The preferred stockholder's liability is limited to the face value of the preferred stock. I'm not sure that'd I'd offer an opinion as to what structure might be ideal. In the first place, I'm not in concept sold on the idea of a corporation. An artificial entity that lives indefinitely, has property rights like a person and unilaterally abrogates the rights of contingent creditors?And even if someone could persuade me that there's something natural about such a creation, I'd be reluctant to offer an opinion on the ideal structure of ownership for such an entitty because millions of people pursuing their own interests in free markets (would that we had some) would surely work out multiple better solutions than anything I'd come up with, not possessing their unique knowledge of time, place and preference. David Levenstam
Re: limited liability
In a message dated 12/17/02 2:30:29 PM, [EMAIL PROTECTED] writes: Fred Foldvary wrote: U.S. and State laws limit this liability, but in a pure market, the directors should be personally and fully liable for a corporation's debts, as would be the general partners of a partnership. In a pure market, shouldn't the directors be personally liable, or not, for a corporations debts, based on whatever terms they reach with the lenders involved? The directors of *small* corporations certainly find themselves in that position today. Without a personal guarrantee, from a primary stakeholder, that serves to turn a limited liability into a full liability, lenders are not very willing to make loans. Cheers, Michael Giesbrecht Internet Engineering Lucasfilm Ltd. But what about contingent creditors of the corporation--that is, what about potential future tort victims? How liability to them be negotiated in advance? David P.S. Any news on when Star Wars Episode III will release? :)
RE: limited liability
--- Michael Giesbrecht [EMAIL PROTECTED] wrote: In a pure market, shouldn't the directors be personally liable, or not, for a corporations debts, based on whatever terms they reach with the lenders involved? Yes, but there are also liabilities that can be incurred without contracts, such as if the corporation is sued for damages. Without a personal guarrantee, from a primary stakeholder, that serves to turn a limited liability into a full liability, lenders are not very willing to make loans. True, especially if there is not adequate collateral, implying that expected future earnings are not sufficient additional collateral. Fred Foldvary = [EMAIL PROTECTED]
Re: limited liability
Fred Foldvary wrote: The argument for [limited liability] is that investors are more willing to put up funds if they will not be personally liable. Nor should they be liable, since lenders are also not, and one could map limited partners into lenders who get a return based on profit. But the borrower would still be personally liable. -- Anton Sherwood, http://www.ogre.nu/
Re: limited liability
In a message dated 12/17/02 12:21:42 AM, [EMAIL PROTECTED] writes: Fred Foldvary wrote: The argument for [limited liability] is that investors are more willing to put up funds if they will not be personally liable. Nor should they be liable, since lenders are also not, and one could map limited partners into lenders who get a return based on profit. But the borrower would still be personally liable. But if the borrow is a corporation then there's nobody with personal liability.
Re: Limited Liability for Vaccine Makers
Can your friend explain why vaccines are different from other drugs? Everything has side effects. Precisely because the Democrats have such a stake in pushing the interests of trial lawyers the Republicans have the opposite incentive making just about any pronouncements on this topic highly suspect - - particularly when they include one-sided political flames. - - Bill Dickens (DC) William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens [EMAIL PROTECTED] 11/22/02 07:27AM David: As you seem interested in this issue, here's a reply I got to my vaccine question from my knowledgeable friend, Ron, who is not on this network. Your, Asa The proposal, as I understand it, is not to cap liability for actual damages, that is medical bills, lost future earning cased by death of a working person, burial costs, child care and similar real damages. Real damages are affordable and can be insured against. Rather, the proposal would protect drug companies from punitive damages, which make up most of the awards in recent absurd tort cases and settlements to avert punitive damages, and vicarious liability, the convoluted search for deep pockets seen in many of these abusive tort awards. Vicarious liability generally involves some obscure claim for agency of the party with deep pockets. Since in the case of vaccines, the only deep pocket would be the drug company producing them, no reasonable Board of Directors would allow a major drug company to produce the vaccines without tort protection. There have been several occasions recently when vaccines were needed by the Armed Forces and the natural producers not being able to obtain tort relief by statute and not being able to insure the risk, essentially put the product in the public domain and the DOD funded a no pocket production corporation to make it. The tort situation for corporations is so bad that most Boards would not do this again because of the potential for vicarious liability for the intellectual property or the bugs or the proto-vaccine. The enormous contributions of the Plaintiffs lawyers to the Democratic Party and to four of five key Republican Senators, McCain and Jeffords, before he switched parties, particularly, are intended to prevent tort limits, like those proposed for vaccines. Absent a ban on punitive damages and vicarious liability, big tort awards are a sure thing with any vaccine. And not just from the actual medical problems that are sure to arise. Count on a vaccine syndrome and a jury somewhere in the Mississippi Delta -- LA, MISS or ARK. ** -- The history of all hitherto existing society is the history of class struggles. -- Karl Marx, Manifesto of the Communist Party
Re: Limited Liability for Vaccine Makers
William Dickens [EMAIL PROTECTED] wrote: Can your friend explain why vaccines are different from other drugs? While I'm certainly not qualified to negotiate that legal minefield, may I guess? I'd say that a drug is intended to fix an existing problem, whereas a vaccine applies a dangerous element to prevent possible future risk. Thus one who gets sick from a vaccine* can claim that absent the vaccine, the illness would not have occured; however, with other drugs the person was already sick and something had to be done. It sounds like a stretch, to be sure, but then the claim that putting a car in drive and pushing the accelerator literally through the floor board is consistent with an automatically accelerating car is a bit of a stretch as well. Yet Audi lost to such a claim. -jsh *Here's an unsettling tidbit: But there would be panic [from smallpox terror scares]. Mass vaccination would be demanded, and politicians would find such calls very difficult to resist. They should remember, however, that when millions of people were vaccinated in response to the outbreak in Britain in 1962, nearly as many died from its complications as from smallpox itself. www.lrb.co.uk/v24/n17/penn01_.html __ Do you Yahoo!? Yahoo! Mail Plus Powerful. Affordable. Sign up now. http://mailplus.yahoo.com
Re: Limited Liability for Vaccine Makers
In a message dated 11/20/02 11:50:17 AM, [EMAIL PROTECTED] writes: Armchairs: What are the pros and cons of limiting liability for the maker of a new vaccine? It seems to me that a disadvantage of limited liability is the moral hazard that the maker will do a less responsible job of trying to prevent bad side effects. One advantage that has been put forth is that limiting liability gets us a vaccine sooner as firms are reluctant to make a new drug in the face of possible law suits for bad side effects. Is there alternate set of rules not involving limited liability that could be adopted to obtain a safe drug in a timely fashion? All the best, Asa Janney For some time now I've wondered about limited liability. A buddy of mine did his dissertation on limited liability in the British context, and as I recall (at least tentatively) concluded that the reduction in investment from having no limited liability would have been small, and that Parliament granted it in its general form for another or other reasons. (I just wrote to him to see what he ended up concluding in the final draft). Limited liability has long struck me as something rather odd, as it unilaterally abrogates the rights of all contingent creditors of the enterprise (potential tort victims). I'm quite interested to hear how people on the list view this phenomenon. David Levenstam
Re: limited liability
A) To accept passive investments Would you purchase stock in WorldCom if you'd be liable for their debts? B) To allow for high risk ventures Would you start a satellite communications company or biotech research firm knowing if it failed you'd be liable for billions of dollars in debt? There are many other reasons, but these two are the must crucial. Also, two misconceptions: A) That limited liability shields liability from consequence of actions. No, officers are liable of any criminal actions (fraud, etc) of a company, and any employee (owner or not is irrelevant) may be sued directly for liabilities their actions caused due to negligence. B) That the State creates limited liability. Limited liability entities existed prior any state sanction, let alone state enforced monopoly over them. Adam - Original Message - From: [EMAIL PROTECTED] To: [EMAIL PROTECTED] Sent: Thursday, July 18, 2002 7:40 AM Subject: limited liability[via LSMTP - see www.lsoft.com] What is the economic argument for limited liability of corporations? Can anyone suggest some readings on this? Jason DeBacker
RE: limited liability
Jason DeBacker wrote: What is the economic argument for limited liability of corporations? Can anyone suggest some readings on this? For starters, I would recommend: Easterbrook, Frank and Fischel, Daniel (1991) The Economic Structure of Corporate Law, Harvard University Press. After that, you could read the papers referred to in this book. Alex Dr Alex Robson School of Economics Faculty of Economics and Commerce Australian National University Canberra ACT 0200. AUSTRALIA Ph +61-2-6125-4909 -Original Message- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]] On Behalf Of [EMAIL PROTECTED] Sent: Thursday, 18 July 2002 11:40 PM To: [EMAIL PROTECTED] Subject:limited liability What is the economic argument for limited liability of corporations? Can anyone suggest some readings on this?
